Meta rose 2.90% against the trend on Friday, closing at $641.69—the biggest gain among the Magnificent Seven that day. Apple rose just 0.39% and Microsoft 0.17%, while Nvidia, Tesla, Alphabet, and Amazon all closed lower. Over the past five trading days, Meta has gained a total of 5.2%, but it is still 17.5% below its three-month high, and a long way from its 52-week high of $779.82.
A new factor is behind this rebound: on November 14, billionaire Bill Ackman published his third-quarter letter to shareholders, naming Amazon, Microsoft, Meta, and Alphabet directly. He said Wall Street’s expectations for these four cloud giants are badly out of sync: analysts assume that high levels of capital spending will continue for many years, while forecasting very low revenue growth beyond the next two years. In effect, they are treating the money spent on data centers as maintenance costs rather than investments capable of generating outsized returns.
Ackman ran the numbers: a 1-gigawatt AI data center costs $40 billion to $50 billion to build and can generate $15 billion to $20 billion in annual revenue once completed. By that math, Meta’s capital expenditure guidance of $135 billion to $145 billion this year isn’t money going up in smoke—it’s laying the groundwork for revenue growth in the years ahead. Meta reported third-quarter revenue of about $64.6 billion, up 26% year over year, and earnings per share of $7.40, beating expectations of $6.54. Its ad business is accelerating even as capital spending ramps up, which Ackman sees as evidence.
But the market isn’t so easily convinced. Two major concerns are weighing on Meta’s share price. The first is dilution: in October, Meta raised about $35 billion through a stock offering and also kept a plan to issue more shares at any time, increasing the share count and diluting earnings per share. On November 12, it also completed a €9 billion senior notes offering, in six tranches due between 2031 and 2065, with coupons ranging from 4.300% to 6.400%. The borrowing hasn’t let up. The second concern is that monetization has yet to materialize: the three avenues Ackman highlighted—Muse agent services, business messaging, and paid licensing of language models—are still just stories, with not a penny yet showing up in the financial statements.
There are three dates to watch: Monday is the 13F filing deadline. Form 13F is the quarterly holdings report that institutions submit to the U.S. Securities and Exchange Commission; it will show whether institutions bought the dip in Meta at the end of the third quarter. On December 9, the Federal Reserve announces its interest rate decision, with the probability of a rate hike close to 90%, which could put further pressure on valuations. The next earnings report is due on January 26. Whether capital spending and revenue growth line up will be the ultimate test of Ackman’s letter.
At $641, bears are focused on dilution and rate hikes, while bulls are betting on accelerating ad growth and agent monetization. Whichever side delivers first will determine the direction of the share price. There’s no middle ground.
#Meta #Magnificent Seven
$META $NVDA $QQQ
A new factor is behind this rebound: on November 14, billionaire Bill Ackman published his third-quarter letter to shareholders, naming Amazon, Microsoft, Meta, and Alphabet directly. He said Wall Street’s expectations for these four cloud giants are badly out of sync: analysts assume that high levels of capital spending will continue for many years, while forecasting very low revenue growth beyond the next two years. In effect, they are treating the money spent on data centers as maintenance costs rather than investments capable of generating outsized returns.
Ackman ran the numbers: a 1-gigawatt AI data center costs $40 billion to $50 billion to build and can generate $15 billion to $20 billion in annual revenue once completed. By that math, Meta’s capital expenditure guidance of $135 billion to $145 billion this year isn’t money going up in smoke—it’s laying the groundwork for revenue growth in the years ahead. Meta reported third-quarter revenue of about $64.6 billion, up 26% year over year, and earnings per share of $7.40, beating expectations of $6.54. Its ad business is accelerating even as capital spending ramps up, which Ackman sees as evidence.
But the market isn’t so easily convinced. Two major concerns are weighing on Meta’s share price. The first is dilution: in October, Meta raised about $35 billion through a stock offering and also kept a plan to issue more shares at any time, increasing the share count and diluting earnings per share. On November 12, it also completed a €9 billion senior notes offering, in six tranches due between 2031 and 2065, with coupons ranging from 4.300% to 6.400%. The borrowing hasn’t let up. The second concern is that monetization has yet to materialize: the three avenues Ackman highlighted—Muse agent services, business messaging, and paid licensing of language models—are still just stories, with not a penny yet showing up in the financial statements.
There are three dates to watch: Monday is the 13F filing deadline. Form 13F is the quarterly holdings report that institutions submit to the U.S. Securities and Exchange Commission; it will show whether institutions bought the dip in Meta at the end of the third quarter. On December 9, the Federal Reserve announces its interest rate decision, with the probability of a rate hike close to 90%, which could put further pressure on valuations. The next earnings report is due on January 26. Whether capital spending and revenue growth line up will be the ultimate test of Ackman’s letter.
At $641, bears are focused on dilution and rate hikes, while bulls are betting on accelerating ad growth and agent monetization. Whichever side delivers first will determine the direction of the share price. There’s no middle ground.
#Meta #Magnificent Seven
$META $NVDA $QQQ