A lot has been said about Meta Platforms (META 1.86%) since its fateful fourth-quarter 2021 earnings update: Its digital advertising dominance is "over," ended by Apple's (AAPL 0.20%) user privacy changes; its bet on the "metaverse" will be an ill-fated dystopian tech experiment; and it lost $400 billion in a matter of weeks (not in actual cash but merely in market cap, which means shareholders have lost $400 billion, not Meta itself).
After it's endured years of political and regulatory criticism and acting as the punching bag for consumer privacy concerns, the sharks appear to be circling Meta. The company's focus on building new use cases for computing and internet-based services will no doubt be an uphill battle, but I think it would be poorly advised to bet against the social media giant over the long term. There's just one simple reason why.
Image source: Getty Images.
Tens of billions on balance and counting
Cash is called king for a reason, and Meta has plenty of it: $48 billion in cash, equivalents, and marketable securities, another $6.8 billion in equity investments, and zero debt. Despite all of the negativity swirling about it, this massive cash hoard adds to the many reasons the Facebook, Instagram, WhatsApp, and Oculus parent organization is one of the most powerful tech titans on the planet.
By way of comparison, here's how Meta stacks up against other technology giants as measured by cash and short-term investments net of any debt:
|
Company |
Net Cash and Short-Term Investments |
|---|---|
|
$127 billion |
|
|
Microsoft (MSFT 0.23%) |
$72.1 billion |
|
Apple (AAPL 0.20%) |
$58.9 billion |
|
Amazon (AMZN -0.11%) |
$47.4 billion |
Data by YCharts.
Also notable here is that Meta's total war chest still sits at record levels even after dumping billions into the development of its virtual reality segment, Reality Labs (RL), in the last year. The RL division racked up $10.2 billion in operating losses in 2021. Despite this, Meta still reported positive free cash flow of $39.1 billion last year, a new record for the social media empire, enabling the company to invest heavily in virtual reality hardware and software and repurchase shares with excess cash at a torrid pace ($44.5 billion repurchased in 2021).
A headwind, not a nail in the coffin
Given the position of strength it's working from, I wouldn't count Meta down and out. Sure, a shifting digital advertising industry will present challenges to the company. But even with Apple's recent privacy changes now in full force, Meta is still projecting 3% to 11% year-over-year revenue growth for first-quarter 2022. And for full-year 2022, Apple's privacy updates are expected to reduce Meta's revenue by $10 billion. That represents only 8.5% of last year's revenue haul. The company will also remain free cash flow positive too, only adding to its cash and equivalents balance.
Like it or not, social media's digital advertising business is alive and well, fueling Meta's development of virtual reality computing for video games, entertainment, and business use. With ample liquidity on hand, Meta will face some stiff headwinds over the next couple of years, but it's nowhere close to being finished. On the contrary, it still ranks as one of the most powerful companies around.
