Daniel Pronk 对 $META 的判断变化

Meta Stock has been crashing over the past week because its trials have officially started and people are calling these bellweather trials where the outcome is uncertain and a lot of people are saying that this could seriously impact Meta's business.

And headlines have even been saying that Meta could be liable for over $1.4 trillion worth of damages. To put it plain and simply, that would bankrupt Meta's business.

So, there's a lot of fear in the market surrounding Meta Stock, and this is largely why it has been selling off so much and is all the way back down to 550 bucks. So, in today's video, I want to share my opinions and my research as to what is actually happening with Meta and what the maximum fines and penalties could be towards the company.

Because typically, when things like this happen, the headlines like to spin it out of control to make it as scary as possible because fear sells clicks.

So, when these things are happening, I think it's very important to try and think logically, cut through the noise, and look at the facts. And that's what we're going to do in today's video is try to focus on the facts and cut through the noise.

All right, so in this first slide, we can see that the opening arguments against Meta started on August 18th. And this is the main negative catalyst towards the share price and why it has been selling off over the past week because Meta is now back in the headlines and there is that $1.4 trillion of damages headline circulating as well.

California, Colorado, Kentucky, and New Jersey are all seeking damages against how Meta operates Facebook and Instagram.

29 states in total have sued Meta over child safety. And another 25 states are going to be going to trial later on. Not quite right now.

So, this negative press releases and headlines that we're seeing is probably going to weigh down the stock for quite some time. To make matters even worse, earlier this year, a jury found Meta and Google to blame for a woman's depression and anxiety, and she was awarded $6 million from the companies.

In New Mexico, Meta also had to pay a $375 million penalty plus an additional $567 million later and implement new safety measures for teens under 18 to limit their usage to 90 hours per month.

These former cases are showing that Meta is losing the warm-up rounds before their big bell weather trials that they are now entering. However, there are some very important things to know about all of these headlines and what is going on.

So, the first one is that the $1.4 trillion number is being used for theater and shock value. No courtroom in the United States is going to bankrupt Meta, and even lawyers on both sides are not taking this number seriously.

As I said earlier, the media just loves to spread shock and fear to try and get you to click on the article and get them more revenue. Based on how New Mexico went with Meta again having to pay roughly $900 million, Meta could face tens of billions of dollars in fines across the 29 states suing them, but the number most likely will not be over $1 trillion. That is kind of just silly.

The courts in New Mexico also ordered changes specifically for miners, and that is the common issue and thread across all of the lawsuits.

They're specifically targeting Meta's product for minors and wanting payments and changes made for that age group specifically. As I said earlier, these lawsuits will also be going on for quite some time, so expect them to remain in the headlines and potentially weigh down the stock for the foreseeable future.

Moving on, this next slide shows us what Meta has going for it. So, first off, Meta has already been developing and introducing specific accounts and features for miners. In 2021, they rolled out take a break reminders, which let parents set how much time their kids can be on Meta's apps.

In 2023, it added a parental supervision hub that blocks direct messages, a quiet mode, and a feature telling teens to close the app late at night. By 2024, Meta said it had over 30 parental oversight tools, and features to help control and limit how minors could use their apps.

Metal launched teen accounts in September of 2024 as well, which means that teens under 16 get the strongest control settings and they cannot change them without a parent signing off.

94% of parents say that these teen accounts are actually helpful. However, the rebuttal to all of these restrictions that Meta has put in place for teenagers is that Meta introduced them because they were responding to pressure and not being proactive and doing it out of good faith.

Basically, people are making the argument that Meta is only doing this because it's facing backlash and lawsuits. And again, not because they're acting in good faith. So, now let's talk about what Meta is specifically alleged to be liable for.

The first one is negligent and defective product design. Plaintiffs are saying that the platforms are defective because they're designed to maximize screen time, which encourages addictive behavior in adolescence. The specific features are infinite scrolling, autoplay, algorithmic recommendations, and notifications.

Then there's also failure to warn. And the allegations say that Meta doesn't appropriately warn miners of the risks and harms of their platforms and apps despite Meta knowing about these risks and harms. Then there are the COPA violations, which is that Meta was apparently collecting data on people who were under the age of 13, which violates COPA, and states now want all of this data deleted.

And then finally, there is the concealment of research. These allegations are that Meta's internal research teams knew its products were bad for teenagers. Then they never did anything about it and never shared the information or made it public, which again is concealment.

Now, that all sounds quite scary, right? So, now let's talk about what are Meta's defenses. First off, causation is the plaintiff's hardest problem, and Meta knows it.

In the KGM trial earlier this year, the verdict nearly turned on whether a family and realworld troubles or the apps were to blame for the plaintiff's mental health challenges. It's challenging to know if the mental health problems would or would not have existed without metazaps, and that is really a key thing in these lawsuits.

It is extremely hard to prove that meta-aps are the cause of mental health disorders or if there's more going on in the person's life that are also contributing to it.

Prospective jurors have agreed that Meta is contributing to the mental health crisis, but also that it's the parents responsibility to make sure their kids aren't on their screens all day. And personally, I completely agree with this point of view.

At the end of the day, if you're noticing that your kid is on their phone all day, maybe take it away or maybe limit their screen time. I don't think that young kids necessarily need to be on Facebook or on Instagram.

So I do think that there is some responsibility and liability on the parents and that is helping Meta's case because if there is a shared responsibility then the blow to Meta will not be as large.

Moving on though many of the specific features also exist on other apps like YouTube. Notifications, autoplay and infinite scrolling are all not metapecific.

Meta's real losses in the earlier trials that it has lost have also been smaller than expected with the KGM verdict being only $6 million, not billions of dollars. And in New Mexico, the penalty came in at only 15th of what prosecutors were looking for.

Meta also has over $90 billion of cash on its balance sheet, and it generates over $130 billion in operating cash flow per year.

So even if the fines are in the tens of billions, then they are manageable and will not impact the long-term fundamentals of the business. Moving on, let's now talk about how Meta is actually good for the economy and for small businesses across the world.

Because I know that Meta gets a lot of hate and the business is extremely polarizing and doesn't have a good reputation. But the reality is that if you are a small business, then you're most likely going to be advertising on Meta's platforms and Meta is going to be one of your largest profit generators.

So if Meta were to go away, then it would be a huge blow to many small businesses and the economy as a whole.

So in this slide, I compiled my research and said Meta is a necessity for small businesses. 96% of small businesses use Facebook, which remains the world's most popular social media website.

57% of small businesses communicate directly with their customers through Meta's apps. Small businesses consistently say that advertising on Meta's apps is their best form of marketing.

Independent researchers say that businesses earn $321 in revenue for every dollar that they spend on Meta.

And it's estimated that US advertisers earn $162 billion annually through digital ads. Meta's advertising technology is estimated to generate $415 billion in economic activity per year in the United States.

So permanently impacting Meta's business would result in real harm to the US economy and tens of thousands of businesses across the United States and the world. Another thing that Meta has going for it is that the trials are specifically scoped to minors and not the whole business.

Every single remedy on the table is defined by user age and not the whole platform.

The New Mexico template is the most confirmed and realworld one that we have. And that ended up being a fine plus changes for users under the age of 18. Now, if COPA was violated, then all the data on people under 13 needs to be deleted as well.

In Meta's own 10K financial statements, it states that the entire litigation is focused on business practices for users under the age of 18 too. A court also has no basis to make Meta change anything for users over the age of 18.

And no plaintiff has proved any adult was injured by Meta.

Now, why this is important is because miners are not Meta's core revenue and profit generator. So, even if this group is totally turned off, it doesn't impact Meta's business materially or its long-term fundamentals in my opinion.

However, removing or restricting miners could shut off future users from their app if they never end up joining the apps once they become adults. And to me, that is the real long-term risk here.

So, let me summarize everything that we have covered in the Daniel Prong slideshow.

The $1.4 trillion headlines are not realistic, and they're just for shock value. Meta could eat fines even in the tens of billions of dollars range quite easily just with their existing cash position.

The litigations across the board are focused on miners which are not the core business of Meta. The real risk is if Meta is forced to change its algorithms or restrict people under the age of 18 which could be a headwind on long-term daily active user growth.

There's a strong argument that parents are also responsible for making sure their kids are not on social media all day. So, the blame is shared.

The realistic outcome is probably a combination of fines that could be in the tens of billions of dollars, plus changes to the product for miners. Long-term, in my opinion, it doesn't seem detrimental to Meta's business or its fundamentals.

However, in the short term, this is providing a lot of uncertainty and scary headlines which could weigh down the stock until more certainty eventually comes and these trials are over and dealt with.

Now, another piece of information that I want to share with you is that super investors are also buying Meta and Meta was the second most bought stock in the second quarter of 2026, right behind Microsoft with 14 super investors increasing their Meta position or starting a position in Meta altogether.

So, it seems like the net sentiment on Meta is very bullish from the super investors now.

So, now let's take a quick look at some of Meta's fundamentals and ultimately why I am choosing to continue holding on to the stock. First off, let's simply go and take a look at Meta's revenue.

And here we can see that revenue is continuing to grow very well. And if we turn on this percent change right here, we can see that Meta's growth rates have actually been accelerating for the past about 18 months.

On a quarterly basis, we are seeing some slight deceleration, but the business is still growing by 28% year-over-year as of the last quarter.

Next, let's take a look at Meta's operating cash flows, which I believe is the best metric to focus on for this business right now while it is investing so much money in capex like all of the other hyperscalers.

And here we can see that Meta's operations are continuing to produce a record amount of cash with $130 billion produced in the trailing 12 months. Now, if we turn on the percent change here, and let me just zoom in a little bit to make this clearer, we can see that Meta's operating cash flows are still growing by about 27% year-over-year.

This is an incredible growth rate at a $130 billion scale. However, as I'm sure we all know, Meta's free cash flow is currently declining because like every other hyperscaler, they are investing so much money into capital expenditures.

But even while Meta is ramping up capex so much, it has still produced $41 billion in trailing 12 months free cash flow. So this is an incredibly profitable business that is growing very quickly.

Next, let's look at Meta's earnings. And here we can see that Meta's earnings have been quite volatile historically actually, which is kind of surprising. This is another reason why I like to focus on the operating cash flows and free cash flow.

Well, historically, it was free cash flow of the business because its earnings have been quite volatile throughout history. flow of the business because its earnings have been quite volatile throughout history. So, I think that pricing this business off of operating cash flow right now specifically just gives us the best picture into how the business is actually being valued in the market today.

So, I think that pricing this business off of operating cash flow right now specifically just gives us the best picture into how the business is actually being valued in the market today. But with that being said, Meta's earnings have also been slightly declining since the second quarter of 2025, and they're down to about $68 billion now in the trailing 12 months.

Meta's earnings have also been slightly declining since the second quarter of 2025, and they're down to about $68 billion now in the trailing 12 months.

If we take a look at a quarterly view, you can also see that Meta has had some pretty weak quarters over the past year. In the third quarter of 2025, they only did $2.7 billion of earnings.

And in the most recent quarter, they were hit by some pretty large one-off expenses and over $2 billion in legal fees, which caused their earnings to only be about $16 billion in the quarter.

And this brings me to an important point that I want to make, and that's that Meta's legal issues do impact profits in the short term. We have seen it before in the past and we have even seen it in the most recent quarter again with billions of dollars in legal fees.

And if Meta does end up having to pay, you know, tens of billions of dollars in fines or settlements from all of these trials, then that is going to be a very real expense against earnings and free cash flow in the short term, which is going to weigh down the company's profits.

And as an investor, I'm actually expecting this to happen again in the short term. But what I think is going to happen, but what I think is going to happen over the longer term is this business's revenue is going to continue growing. It's going to continue scaling and in 3 years from now, we are not going to be talking about what happened in the trials of 2026. I believe that Meta's business is going to grow through this.

I think it's going to be extremely noisy in the short term. It's causing the stock to see weakness. It's causing Meta's multiples to compress dramatically. But I believe that ultimately these are shortterm issues. They're going to impact profits in the short term. The business is going to see headwinds and negative headlines.

But what I care about as a long-term investor is am I getting a good price today relative to where I think the business will be over the longer term. And I believe that Meta is one of the best most highest quality businesses in the world that is going to get through this.

They have the resources to get through it. and three years from now, it's going to be a much larger business and a much more profitable business as well.

So, for me as a long-term investor, I am viewing these short-term And that is really what it comes down to. And with that being said, let me show you some of Meta's multiples now. So the first one is on a price to earnings ratio basis. This is Meta's GAP trailing 12 months earnings now. And it's sitting at a PE of only 20.6. This also includes that very weak Q1 earnings that we saw earlier on in the video and even the $2 billion of legal fees that they had to pay in the most recent quarter. In other words, I do not think that this is a normalized price to earnings ratio for Meta. And I believe that over the past year, they've actually had a lot of noise and one-time hits to their earnings. On a normalized earnings basis, Meta is probably around 18 times earnings right now.

So, now let's view Meta's price to operating cash flow. And since the company IPOed, you can see that its price to operating cash flow has been coming down and compressing. Meta's price to operating cash flow is now down to 10.8. Basically, the only time that it got lower was when it got all the way down to 4.4 in 2022. I personally believe that this was an anomaly in the market. Meta never deserved to be this freaking cheap in 2022. And yes, I was buying shares in this dip. And outside of what happened in 2022, this is around the lowest that Meta's price to operating cash flow has ever gotten. For example, in the stock market crash of 2020, Meta bottomed at an 11.5 price to operating cash flow. This means that Meta is cheaper on an operating cash flow basis today than the stock market crash of 2020. That is how bad the sentiment is towards this business right now.

And the last metric that I want to look at is the forward price to operating cash flow. And if Meta can continue to grow its operating cash flows in line with analyst estimates, then it's trading at only 8.1 times next year's operating cash flow. This is for one of the most profitable, highest quality businesses in the world. That's still growing almost 30% per year.

So for me as a long-term investor and as someone who is trying to buy businesses for the next 3 5 10 20 years, I believe that right now is a very nice entry point into Meta. And I have been consistently scaling up my Meta position in the market as well really except for over the past week because as I shared, I have been planning to buy a new house and that has been kind of tying up my capital.

So overall, I do continue to be extremely bullish on Meta over the longer term and I think that relative to the long term, the share price today is looking very attractive. However, I have no idea where the stock is going to bottom because right now the share price is being guided by headlines and how much fear is surrounding the stock. If we see any more negative developments in the trials or if some larger fine comes out, then maybe the stock could be even more impacted in the short term.

But as I said earlier, as a long-term investor, I'm trying to think where is Meta's business going to be in 3, five, and 10 years from now. And when I think on those time frames, I don't think that the headlines and the distractions of 2026 are going to be impacting the share price or the fundamentals of the business that far into the future.

So, it could go lower. I have no idea. And if it does, I'm just going to continue buying and nibbling and scaling out my position.