There are issues, but Meta Platforms Inc. is probably a decent long-term deal right now

HUNG HOM, Hong Kong - Sept. 16, 2022 - PRLog -- Under the surface, however, META is tremendously lucrative and management is repurchasing a large amount of stock. So far, $14.7 billion has been invested in 2022 alone.

META disclosed that it repurchased $5.08 billion of shares during the second quarter, increasing its 2022 total to $14.7 billion. It's a considerable decrease from previous quarter repurchases but it's still a significant return of capital to shareholders given that META continues to use liquid assets on its balance sheet to do so, for better or for worse.

When a firm matures, surplus cash returned to investors through stock buybacks or dividends is usually a positive thing. So, why would share repurchases be detrimental to META at this time? As we've previously stated, one issue is that META overpaid for its shares in the last year or so. With stock prices at multi-year lows, the pace of share repurchases is slowing. It would be preferable if the rate of repurchases increased as opposed to decreasing with time.

Another issue is that META has a lot going on and is possibly investing money in other areas, such as product creation, would be more prudent. The Metaverse, as summed up in the "Reality Labs" business sector, was a $2.81 billion drag on operational profit in the most recent quarter, keeping the company on track for $10 billion in yearly losses, as CEO Mark Zuckerberg projected. If more immersive experiences are the future, perhaps greater investment in this area might benefit not only Reality Labs, but also the decreasing results from social media platforms Facebook and Instagram. After all, the Metaverse will not emerge suddenly. It will be built progressively, with additional capabilities (such as more video material on social media sites) being added over time.

However, as shareholders, we must have faith that management is evaluating the returns on investment for its different programs and if everything is well-funded and there is still money left over, stock buybacks are simply the greatest option right now. Times are tough (at least for META, other digital ad firms are doing well) and sometimes the passage of time is the only solution while we wait for the company's current rate of investment to pay off.

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