The disappointment of Meta's performance: Forager
The tech bust has finally hit the likes of Alphabet, Microsoft and Meta, according to Forager.
On an episode of Forager’s podcast and in an investment update, chief investment officer, Steve Johnson, and portfolio manager, Gareth Brown, discussed how the tech sector was faring.
The pair expressed their disappointment in the performance of Meta, which was a 3.7% holding in its International fund.
It had been intended to provide the fund with a large, reliable cash generator but had been a “dismal failure” and the pair said they were discussing whether the firm should continue to be a holding.
“[Meta] has been a very disappointing investment for us and it’s going to be a fascinating show to watch unfold over the next 10 years, but that doesn’t mean we need to be an investor along that period,” commented Johnson.
Meta, which owned Instagram, Facebook and WhatsApp, was “being priced like an oil stock” according to Johnson.
“You can buy Meta at the moment for about nine times the amount of profit that it’s going to make this year,” he said.
The conglomerate was previously traded at 30 times earnings. Investors were now expecting Meta’s earnings to shrink over the next 12 months, as their third quarter earnings revealed a 20% plunge in shares - their lowest in nearly seven years.
Alphabet Inc, the parent company of Google, and Microsoft were two companies which had dominated the tech sector and stockmarket simultaneously. Despite their successful past, Forager’s CIO noted their recent “disappointing updates”, as share prices plummeted by 30%.
Brown commented these multinational technology corporations had “grown a lot further and bigger than I think anyone, maybe other than Bezos, could have predicted 20 years ago.”
“They have had a scale advantage working for them without the usual offsetting diseconomies of scale. They’ve been able to grow faster than most smaller businesses for a long time,” he said.
Johnson also recognised how COVID-19 continued to impact the tech industry, despite their exponential growth during the dot-com bubble.
Whilst Google and Amazon traditionally focused on their delivery of goods over services, the global economy was now experiencing a ‘switch back’ - creating a “hangover effect”.
Economic slowdown and natural maturity of the market had additionally contributed to the tech giants’ decreased growth.
AUTHOR
Jasmine Siljic
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