META is a hold; high capex and unproven AI monetization limit upside at current levels, but a drop to <22x earnings would make it a buy.

Meta's stock price saw a remarkable increase of 35% last month, thanks to the outstanding success of Muse, the AI-powered smart assistant app , which topped the list of most downloaded apps in the app store.

But does this fundamentally change the nature of the company's work? Is this stock a good investment opportunity today? I believe that about 98% of its revenue, or thereabouts, comes from digital advertising.

We know its applications: Facebook, Instagram, WhatsApp, Threads, and Messenger. It has approximately 3.6 billion daily users.

Reality Labs is moving towards artificial intelligence in some aspects, but currently it is focusing on its core business that we know and love: social media.

The same applies to Facebook and Instagram, where advertising becomes part of the experience, and is even considered valuable advertising for consumers, isn't it?

At the time of our recording today, the price-to-earnings multiple is approximately 28, while on a forward basis it is approximately 24. We'll see if this changes based on Muse's performance.

I don't think there are many income-generating opportunities there, but we'll get to some of that later.

Given the underlying activity, do you see any positive factors that make you optimistic as an investor? As you know, it increases opportunities for earning income . In fact, there aren't many people who can reach them.

I think one of the interesting things about expanding the target market is the potential to generate more profit per user , but is this core activity enough to justify a stock price like this at less than 30 times earnings?

Did I mention 3.6 billion daily active users? Yes, you are right. The downside is that they are facing a shortage of potential users , but that number is still enormous, and this company is like a money-printing machine.

This core set of applications generates $115 billion annually, which is the money invested in all these other things. As I mentioned, the positive aspect may not be their ability to attract more users, as they are facing a shortage of them.

But advanced artificial intelligence , and all the algorithms they use, directly boost the time users spend on short videos and the time they spend on news feeds, making ads an integral part of our social feeds, not just ads.

This results in double-digit growth in both ad impressions and average price.

So, the advantage here is that they already have a large audience, and they continue to improve their ability to monetize these ads and provide value to advertisers. It's not just about their ability to sell a lot of ads, but also their ability to convince advertisers to spend more on them.

This, in my opinion, demonstrates the effectiveness of algorithms.

The next chapter is still being written. But yes, I think there is a possibility, perhaps not as massive growth as there was a few billion people before, but there is certainly a high probability that this perpetually moving machine will continue to spin.

Another thing I would like to address is the flexibility of future work, because I think if we look at the core business that has remained strong for a long time, and they continue to improve it, one of the things to respect about Mark Zuckerberg’s way of running the business is that he does not run it based solely on impressions, but relies heavily on A/B testing to determine actual preferences.

Do you remember when they moved to the latest news page on Facebook, and then to Instagram as well ? You know, I know you say you want to see your family and friends, but you actually spend more time on the app when you see the best content available.

Even TikTok pushed them in this direction. They were very skilled at doing that with extreme precision .

But what they failed to master in the past was the creation of new products. Instagram and WhatsApp were among the acquisitions. It's clear that Facebook has been their primary product from the beginning.

But now, with Muse entering the picture, their first new product since Threads , they spent between $20 and $30 billion acquiring companies and individuals about a year ago, based on the idea that artificial intelligence represents an existential threat to them, and they must find solutions for its future, and this product has achieved great success.

Do you think that the Muse app, as a product, can join this group of apps and become a key driver of the company's future growth? Well, I'm glad you said "maybe," because that makes it easier for us to predict what will happen.

We'll see, but yes, it's possible. Muse is interesting. But it also has many negative aspects, because it is ironic that we do not believe what people say or what they do. Meta is probably the biggest target for privacy concerns, etc. However, we spend long hours on the app.

So, I don't know. The prevailing view is that there are privacy concerns. We will not hand over all of this data to Muse in order for it to function efficiently. I don't know if history has proven that this is the real obstacle that this statement might suggest .

There is something special about the idea of ​​a personal assistant, and they seem to be very advanced in this field. But will we trust him ? Will we adopt it? Will another competitor emerge and create a similar product, and is this just fierce competition for the worse?

I'm not prepared to say that this product will be a huge success in the long run, but it's really interesting to see what they're doing today.

From a usage perspective , Muse appears to be a very successful product. I personally use it, and I have linked some devices to it. Ironically, I have linked a number of Google products to it, such as Gmail and Calendar.

We'll see if they can offer a competing product.

But the most important question is: how will they make a profit from this? This goes back to the beginnings of Facebook. Facebook was not a profitable company, and it did not have a successful business model until Sheryl Sandberg joined it.

I'm not sure of the exact date of her appointment, but it was years after the company was founded, when it had fully matured. I believe she was leading the Google search and monetization department there.

The advertising platform was brought in, and that's where the company really took off. Not from the user's perspective , but from the revenue perspective.

Do you think Muse can be a revenue engine in the same way, or does the percentage of profit from advertising mean the amount that the supplier or advertiser spends on advertising?

Let's say you're going to sell a product for $100. For example, you go to Meta and say, "My budget is $20 to attract this customer who I expect will spend $100 ." They will say, "We will provide you with as many customers as possible, and we will earn up to the maximum of $20."

If you adopt the affiliate marketing model, it will be difficult to determine how much profit you will be able to make. So , if you're selling, you know, they've given examples like booking a flight, well, Expedia isn't going to share 20% of the revenue with them.

They might say, "Okay, we'll share 1%, 2%, or 3% of the revenue." But now , you have to compensate for that with size.

This is the most important question for me: if this will distract from those apps and advertisements, do you think that will be positive for the company? I think I'm glad you've provided all this context, because the great thing is that they're not starting from scratch this time.

It wasn't like when Sheryl Samberg joined Facebook and they had to build all that infrastructure . This infrastructure is the foundation today. So even if it comes down to size, the good news is that they have the capacity to achieve it.

I am very skeptical about making money from Muse by charging fees for it. I agree with you on that. I think there is potential to develop Muse's core business, and it may not look exactly the same , but I think this approach is defensive and maintains their competitive advantage.

Perhaps they can now launch an attack and develop this advantage. It may seem difficult to do, but I believe there are many ways to integrate Muse into the ecosystem, tie it into existing relationships, and perhaps sacrifice some profits in the short term, but while maintaining their dominance and continuing to build the business.

Yes, I think one of the things that suits them perfectly is that I see a lot of food recipes on Instagram, but I have to look up the ingredients and see if we have them at home.

If I could simply use Muse, I would say, " Okay, I'll add it to my shopping cart." Add it to your shopping cart, whether on Amazon, Target, or even from your local grocery store or via DoorDash, it could be a win-win for everyone.

What is the biggest obvious flaw in MetaTrader's stock today, in your opinion? I believe, and it is clear, that they generate annual revenues of approximately $115 billion, but they currently spend between $ 130 and $145 billion.

They are not the only ones in this situation. But all these companies that used to generate high profits have turned into companies with low profit margins and huge capital expenditures because of artificial intelligence, and this is what must change.

What if Muse had simply kept its stake ? Theoretically, if they continue to spend in this way , they should increase their revenue. I don't know if they can achieve that. Therefore, either expenses will gradually decrease or they will have to significantly increase their cash flow .

I don't know how to reconcile all these contradictions, but I think this issue must be addressed at some point, and the current situation cannot continue forever.

Do you think that leasing computing resources represents an opportunity or a positive thing for them ? Because I know this is one of the things being considered as a possible positive outcome.

Even if the Muse project doesn't succeed , they have all these computing resources, and they can simply rent them out to someone else.

In my opinion, I see that as a major flaw. As you know, capital expenditures are extremely high at the moment , and they are constantly increasing. These are the quarterly capital expenditures we have here: $30 billion in the last quarter.

And they will spend even more in 2027. All of these big tech companies are now suffering from negative cash flow, and negative free cash flow as well. If there is no rewarding return from the job offer, i.e., if there is no profitable source of advertising income, you will not be able to rent it to someone else.

If Meta cannot find a way to make a profit, who will?

As a shareholder, I don't want Meta to become just another ordinary computer supplier . This does not seem like an ideal use of capital, and the risk is that this will become just another one of their apps.

Do you think this is a real risk, that the drain on capital could become so high that they might create a great product, but there is no return, and your options are limited: you can rent computers , but you will be competing and doing the same thing as everyone else?

Yes, there must be a return somewhere. I mean, this is a business sector that has consistently achieved a return on invested capital exceeding 10%. When they spend between $100 and $150 billion annually, that's a huge return. As you know, it's a big obsession.

You're right. I mean, in the short term, computing power is scarce. Therefore, profit can be made from it. But it is almost certain that this will not last, because either, as she says, if they cannot operate it, no one will be able to operate it and demand will fall.

Or we are witnessing the construction of a huge number of data centers, and over time additional capacity will become available . Not everyone will be able to use it. Therefore, there needs to be a balance, and at best, leasing the capacity is a short-term source of income to support it.

As for the long-term solution, we must find a way to use this to the benefit of our business and its growth. I don't know if Muse is the solution here . Again, if it will just continue to work.

So, the downside is that it's more like an ill-advised adventure, as it's not just Meta that's involved, but the entire sector, where they are supposed to find fruitful uses for the capabilities they are building. This will undoubtedly not happen to everyone .

Well, the definitive answer to today's most important question is: MetaTrader's stock is currently trading at approximately $745 per share, with a market capitalization of $1.92 trillion and a price-to-earnings ratio of around 28.

Is this a buy, sell, or hold price? I think it's definitely a holding price. I think it could be a growth-oriented purchase. I don't want to take too many risks here, but there are paths where their strategy might succeed, and I hate to ignore that.

And you already have a solid foundation. I think it's more of a hold price than a strong buy price, but I understand some people's desire to adopt this bold bullish approach, and perhaps make it part of a diversified portfolio.

Yes, the stock has seen a significant rise in just the last two weeks. So, I hesitate to say that this is an exceptional purchase today, because I feel that in the next couple of weeks we will see the emergence of other products very similar to Muse, you know, from other companies.

They all work on the same type of projects. Therefore, I don't believe that a rise in Muse's stock price alone will be a major driver for the company. But I think that in the event of another downturn, which usually happens from time to time with Meta stock, getting any of these cloud computing giants at less than 22 times earnings is a very good valuation.

Because I think what we've seen with all these giant companies is that artificial intelligence doesn't pose a real threat to their businesses. Rather, it is a sustainable innovation that will enhance its profitability in the long term.

The question is simply who will capture which share of the market. I believe Meta will receive significant attention in its applications. They have now proven their ability to achieve fruitful results and produce a good product using artificial intelligence, something Alphabet has not yet done.

It remains to be seen whether they are able to build a leading model that can compete with other companies. They probably don't need that.

I will maintain my recommendation to hold the stock, and if the stock retreats from the slight rise we have seen recently, and reaches a valuation level similar to Alphabet and similar companies, I think this is a

The best time to sell is when these levels are reached, because I believe that these capital expenditures will inevitably, at least in the short term, negatively affect these companies as questions arise about the return on investment.