Meta Is Up 30% - Is It Too Late To Buy?

I've been in Italy for the past couple of weeks and a lot has happened since I have been gone. We have had Brookfield's investor days. Meta stock is up roughly 30% and Meta hosted its connect event. Interest rates have risen. Bond yields are up to 5.3% and are making 20-year highs. And a lot of stocks, even though you don't see it, are actually in pretty large corrections. So, there is a lot that we need to catch up on and discuss over the next couple of weeks. And today we are going to start by talking about Meta because Meta stock is up roughly 30% from its lows just over the past month. And many of you have asked me if the stock is now looking expensive, if it is no longer a buy, and if it is now time to sell the stock. So I am going to be sharing my DCFS and my thoughts on Meta's valuation near the end of this video. But first, there is a lot that we need to discuss and a lot of updates with Meta stock. So let's just dive right into it. And I have a lot of screenshots that I want to show you. So let's get started with today's Daniel Pron slideshow. All right. So the first thing that I want to show you is that the recent rally to MetaTock is largely because of their successful launch of their Muse app, which I am sure we have all heard about by now. This app is an AI agent that actually performs tasks for you. It's completely free and also extremely easy to use. And this chart right here shows that Muse's adoption has been extremely quick and has now had even more downloads than Chat GPT relative to both launches. Muse has hit over 3 million downloads in the United States within 9 days. This is the power of Meta having free distribution across the United States and really across the globe. So, as Meta continues to launch Muse across the world, it will be able to distribute this Muse app essentially for free and advertise Muse across Instagram and WhatsApp and its other platforms, even Facebook. I don't know about you, but I have been seeing a lot of Muse ads on my Instagram feed. I already have Muse, but I am seeing it telling me to go and download Muse. So, pretty much every single Instagram user is probably seeing the same ads. And this is why I am saying that Meta has basically free distribution with every new app that it launches. And this is also how Muse is adopting so quickly and getting so many downloads in a very short period of time. And due to Muse's success, it has become the number one most downloaded app on the app store for weeks now. It has been at the number one spot for about 2 weeks straight now, surpassing even chat GPT. I am also continuing to see more and more interesting use cases for Muse coming up on my feeds as well. For example, this person connected Muse to their Spotify and Muse now creates playlists of things that they are likely to be interested in. Muse can also create its own podcasts based on things that it believes you are interested in and then put those podcasts directly into your Spotify playlist as well. Another really interesting use case that I saw is this person on X built their own custom app that shows her in outfits from her favorite clothing stores so she can see what clothing looks like on herself before she buys it. This is absolutely wild and it was completely built within Muse. Another person built a form checker for her workouts. What she does is she records herself doing deadlifts as an example and Muse tells her how she can improve her form and what she is doing wrong. Again, this is absolutely wild. Muse is basically this person's personal fitness coach and this is entirely built within the Muse app. So, now let me show you how I have been using my own Muse for my own businesses because I have been able to get access to Muse in Canada now and this thing has been freaking awesome. So, I want to show you some use cases that I have found for my own personal businesses. One of the things that I do not enjoy doing for my own business is managing all of these sponsorship requests that I get for my channel. This is a lot of manual typing and work for me to keep track of them all because I get reached out to by dozens of companies per week and I do not have an assistant helping me out or doing anything for my channel. It is all just me doing this. So, what I did is I asked my Muse if it could watch for sponsorship emails and draft responses. I gave it my rates, the businesses I do and don't work with, and I let it have access to my business emails. It went through and found the companies looking for sponsors, drafted replies, asked me to send the replies, and it actually did. It was seamless, and it saved me a ton of time. I then asked it to help me find even more of the best businesses that are quality and would resonate with my audience. So, it went out and it found 17 different businesses that it believes would be suitable for my audience and my channel. I then asked it to draft me emails to these businesses and find the best emails to reach out to. And it did. And it drafted 17 emails to the best contacts at these companies. I did not need to go out and find their email addresses or write drafts or anything. I just needed to approve Muse to go out and send these drafts. And it showed me all of the drafts first as well. I then asked my Muse to create a media kit for me and my channel based on my channel's analytics, average view counts, sponsorship offers, historical companies that I have worked with. And it did. It created a beautiful media kit for my channel to send to potential sponsors. and it attached this media kit to all of the draft emails that we were just discussing and then it sent them all out. This was absolutely insane and it saved me a ton of time. Muse also manages all of my sponsorship emails coming in now and all of the threads that I have going on. It sends me one update per day at the end of the day and tells me everything that I need to know where all of the sponsorships are in terms of the deals actually being closed, the negotiations going on, and it even sends me recommendations for what it thinks I should do in those negotiations. This is literally like having my own personal assistant for my YouTube channel. Now, like guys, this is a gamecher for me and it's probably going to increase my revenue on my channel because as I said earlier, managing sponsorships is something that I did not like to do. I did consider getting a personal assistant at one point to do this for me, but I never did. But now, Muse literally does all of this work for me and all I need to do is just hit accept and it will go and send out the drafts. So this is an app that I am using daily and I am seeing real benefits within my own business now. But let me show you another use case that I have found with my own muse. So as I have shared on my channel previously, I am closing on a new house. Actually I am getting possession of my new house tomorrow which is very exciting. I'm very excited about it. I have been living in this house for 7 years. I've talked to you guys about that before. Now with that being said, the process of buying a home is very extensive. You have to talk to your realtor. You have to talk to lawyers. You have to go and set up home insurance. And probably there's about 100 plus emails that I have had now in different threads with my lawyers, realtor and insurance company throughout my throughout my inbox. Now, as I said earlier, I have given Muse access to my email and it has all of the context. It has read all of those emails. So, I was going to the bank a couple of days ago when I got back from Rome and I needed a bank draft and a bank draft receipts or two bank draft receipts and I needed a bunch of items for the lawyer meeting for my final document signing. So, instead of going through my email, you know, those hundreds of emails that I have had to um have in my inbox through this home buying process, going through those emails and trying to figure out every single thing that I needed for my lawyer meeting and my lawyer signing, I just went over to Muse and I said, "Hey, I'm having my meeting with my lawyer this morning and I'm heading to the bank. What do I need?" Muse went through all of the emails and it told me the dollar amount for the bank draft that I need for my lawyer meeting and it told me all of the documents that I needed for that day. It's also now tracking my closing because I have my final walk through this evening, which is very exciting. But even for my final walkthrough, it has made a list of everything that I need to check based on the contract and the agreement that we came to with the realtor, the selling realtor. This is ridiculous. This has saved me so much time and I cannot believe that this app is free. Like, this is actually freaking awesome. All right, instead of having to go through my emails and spend dozens of well, I guess it would be dozens of minutes or hours doing this, I can just ask my muse, hey, go and fetch me that document or, hey, what does that contract say? And it will go and find it for me. And so far, it's been completely accurate. So, that's another use case just in my personal life of having my Muse connected to my email. All right. Now, as you can probably tell, I am pretty excited about Muse and I have been trying to find a lot of use cases for it. So, I want to share one more with you very quickly. So, when I was younger, I was in a program called Kuman. This was to help me accelerate in math, and it's probably why I am so good with numbers today. But when I was younger, I was in Kuman from probably grade 5 to grade 9. And it got me about 2 years ahead in math. So, for example, when I was in grade seven, I was doing grade nine math because Kuman was awesome and it freaking worked. What I've wanted to do now that I am older is to try and keep my brain sharp. I was actually considering going back to Kuman. And for those of you who may not know, Kuman is something where that you go to once a week and they give you booklets. It's like math booklets. I believe that they also do language and English, but I was in the math program. So, they would give me a booklet that I had to do every single night for a week and then I would go back to Kuman and they would grade it and score it and then move me up essentially. But the the the real thesis of Kuman is that you should be doing math once per day to keep your brain sharp. So what I did with my muse is I told it, hey, I want to have a Kuman like program built for me so that I can keep my brain sharp and learn more grammar and continue learning more math and just, you know, keeping my brain sharp. And what it did is it built me an entire week program. It built me an entire 13page PDF with score sheets, math, grammar, and workbooklets that I can do on a daily basis. This is ridiculous. All right? Like you can just ask it to do this and it will go and do it. So that's another use case that I have found with my Muse. So now let's talk about how Mark Zuckerberg is planning to monetize Muse. The first one is through subscriptions. But in all of my usage of Muse so far, I have not reached my usage limits. Not even close. I asked my Muse to tell me how much token usage I have used and it's only at 5%. And I have used Muse a lot. So I don't think that a lot of your everyday consumers are actually going to end up having to pay a subscription for Muse. I think that would only be your super heavy users. So what Mark Zuckerberg believes is that Muse will make money for its users and then Meta will take a portion of the money that the users make. However, I am skeptical that this is going to work broadly. I mean, go back to my sponsorship examples. My sponsorships are paid directly to me and my bank account or to my PayPal. And while Muse helps create value for me and helps me generate more revenue, Muse never actually touches the transaction. So, I don't know how Muse is going to get a small percentage of that money that I am making through additional sponsorships. fees could work if Muse is buying something for the user off of an e-commerce platform, for example, then Meta could take a real transaction fee if the transaction is running directly through Muse. However, I also think that this revenue could be more volatile and non-recurring. It's not like a subscription model and it really depends on how much money is flowing through the Muse platform. So, for now, I think that the savings shared revenue model is a little bit unclear to me, and I'm a little bit skeptical that this is really going to work out. We're going to have to just wait and see, I guess. In my opinion, the clearer upside for how Meta plans to monetize Muse is by getting a lot more data on its users. For example, users such as myself are giving Meta access to their emails, businesses, subscriptions, what they're searching for, and more. If those insights can be fed into Meta's advertising engines, then its advertising ROI could get dramatically better. And I think that this is where the real monetization opportunity is for Meta's business. Meta is also building out Muse for small businesses. It's doing this by allowing more and more apps like Shopify, Figma, and Canva to connect with Muse to help manage whatever your business does or needs. Muse can also connect to your Instagram, Facebook, and Meta Ads account. Muse can help you build out advertising campaigns and manage them for you, too. It's literally like having an assistant run your online social media presence and advertising. And I think that by businesses allowing Muse to run their advertising budgets and increase the return on ad spend, then Meta could end up making more overall money as well. Now, there's another thing that I want to talk about in terms of Meta's Muse disrupting other businesses. There's worries from investors that Muse is going to disrupt the online digital economy since the switching costs of consumer products will be attacked. For example, if you can tell your Muse to go and find you the best auto insurance, then it handles the entire process of switching, then the switching mode of insurance is being attacked. Historically, people stay with their providers because they don't have the time or energy to shop around, negotiate, and actually switch. But Muse can do this for the consumer. People are also worried that Muse will disrupt the travel and booking platforms since it can find you the best options then book them without you needing to view the platforms like Airbnb or Booking.com yourself. Then with online shopping, Muse can find you the best products at the lowest price and order it for you without you ever needing to visit Amazon, which disrupts Amazon's advertising business entirely because humans are not viewing the ads. agents and computers are going to Amazon's platform to buy you the products instead. Amazon has actually blocked Meta's Muse from using its platforms due to this. Amazon isn't admitting it, but Agentic Shopping will impact its high margin advertising revenues. Now, I've discussed my thoughts on Amazon's advertising business being disrupted before on my channel. So, I'm not going to go into my thoughts there again, but overall, it sounds like agents could start to disrupt these switching costs and advertising revenues of a lot of online businesses. Or at least that is what the market is thinking. But let me ask you this. Would you feel 100% confident booking an Airbnb without at least looking at it on the Airbnb platform and also looking at other potential Airbnbs and viewing them for yourself? Like would you really go to Muse say, "Hey, find me the best Airbnb and then book it blindly." Personally, I wouldn't. I'm not quite there yet and I don't have that much faith in agents so far. I would ask you to go and find me some of the best options and then go and look at them myself on Airbnb's actual platform and make sure that I am getting the best Airbnb while still using my opinion as well. This also applies to my everyday products that I may shop for on Amazon. Yes, I may use Muse to help me find the best product, but I think that people inherently still enjoy the process of window shopping and consumers actually enjoy the process of looking around and finding the best deal and finding the best product. So, I'm not entirely sure that agents are going to fully disrupt the online digital economy and the advertising businesses of businesses like Amazon. So, that's kind of where I sit currently on agents disrupting online or really the online economy. I'm really going to be watching Amazon's advertising revenues and the revenues of booking in Airbnb. But so far, I'm not convinced that these businesses are going to be entirely disrupted. And if they are, then I think it's going to take a really, really long time. In fact, Amazon's advertising revenues are still compounding and accelerating, although we haven't really seen Muse impact that business yet. but we're going to see that heading into the holiday season and over the coming years. So, that's something that I'm going to be watching. So, now let's move on to the Meta Connect highlights. And I know that we are jumping around a lot, but as I said, there has been a lot of new news with Meta since I have covered it last and since I went to Italy. So, I watched the entire Meta Connect presentation and here are the bullet points that I came up with. Muse is at the center of what Meta is building now. It is powering the entire business and all of its products. Meta wants to become the super intelligence tool that billions of people and businesses will use. Muse is an AI agent that works for everyone. No matter how techsavvy you are, Muse is using its own models to do all of this. So, it is not relying on anthropic or OpenAI and it is not giving them as much revenue and going forward, I think that Meta could end up giving anthropic and open AAI even less revenue as it continues to build out and use its own frontier models. Mark Zuckerberg also said that its new and most powerful models should be coming soon. This is their watermelon model that they have been teasing for quite some time, but it sounds like the watermelon model could be at the frontier, and this again will power all of Meta's internal businesses. Meta has shifted its focus from virtual reality and the metaverse to building the best personal devices for super intelligence. Meta's new VR glasses were very impressive. And it's at the point where I want to get my own hands on a pair because they do look very, very impressive. Muse Charm, though, I am questionable about because I don't think that people want to have another device in their pocket that they have to interact with, especially when we already have our phones. So, I'm not convinced that the new Metacharmm is going to work out or really be meaningful for Meta's business. Overall though, Metacon did not talk about social media or advertising at all. They made it clear that Meta is trying to create products that will allow anyone to use AI for their own benefit and Meta is trying to become a hardware company as well and the best hardware company for personal super intelligence. That is where the company wants to go. And why I like this as a Meta shareholder is because it seems like Meta is continuing to try and diversify its revenue. It still has a highly profitable advertising business that is generating hundreds of billions of dollars in profits, but it sounds like they want to continue diversifying, build out their own models, potentially even sell their compute infrastructure, and also create new hardware revenue. And it seems like the hardware revenue is getting extremely impressive and could start seeing more mass adoption. And I think that this could be great for shareholders over the long term if the revenues and cash flows do diversify more away from advertising. So now let's summarize the highlights of what we have talked about in this video. Muse is an incredibly useful app that's being very wellreceived even by people who are not techsavvy. Meta has massive and free distribution which is making its adoption even faster than chat GPTs. Muse could gain significant data on users, which ultimately could improve Meta's advertising business and get it to generate even more cash flows. Meta says Muse is now at the center of everything it's doing. Meta also has more powerful models coming soon, which could push its models to the leading frontier. Meta is building hardware to help everyone use AI to improve their lives. Meta is launching business software and agents. Another thing is that OpenAI's dots, which is its Muse competitor, was not wellreceived, and it will cost $200 per month in that subscription range for people to even use. So, it seems like Meta has the lead for consumer Aentic AI. So, now let's wrap up the video by talking about my DCF on Meta. And this is the DCF that I have been running on Meta for the past couple of months when I was aggressively building out my position under the $650 range. As I have shared, Meta has become the third largest position in my portfolio and I am sitting on significant gains on my position now as the stock has rallied again from 30 again as the stock has rallied about 30% from its lows. So in this DCF over the next 3 years, I am saying that Meta will grow its operating cash flows by 15% annually and trade for a price to operating cash flow of 14. And with these inputs, I still get about a 15% compounded annual growth rate to the share price, a fair value of $827, and a future stock price of about $1,100 per share, which would be a 50% return over the next 3 years. However, I do still believe that this is a conservative DCF. And even with these conservative metrics, I do still get a pretty strong 15% compounded annual growth rate over the next 3 years. The reason I think that this is a conservative DCF is because Meta is growing much faster than 15% annually right now. And it seems like the business is seeing accelerated momentum. So 15% growth I think is lower than what the business could do in reality. So if we bump this up to 20% annual growth, then the compounded annual growth rate return goes up to about 20%. Now, if we also swap over to Meta's historical price to operating cash flow, we can see that its median since 2019 is actually sitting at 16. 14 is what I have in my DCF, which is below the company's historical averages. So, if we even bump up the price to operating cash flow to 15, which is still below the median of 16, then the compounded annual growth rate goes up to 22.6% and Meta's fair value goes up to about $1,000 per share. And I think that this is a more realistic DCF for Meta. Obviously, it is not as conservative as the one that I have been using on my channel. But I do think that this is a more realistic one because again, 20% annual growth over the next 3 years, I think is very achievable. And 15 times operating cash flow is still below Meta's historical median. And with these inputs, we still get a 22.6% compounded annual growth rate to Meta share price over the next 3 years. So my conclusion is that Meta Stock is still undervalued. And when I have some more cash entering my portfolio, it's still a stock that I am going to be looking to continue buying. To put this in perspective, my first Meta share that I bought was around $680 in February of this year. Since then, Meta's business has grown tremendously and the share price is only up about $40 or about what would that be maybe 6 to 7%. And I know that it can be challenging to want to continue buying a stock when it's up 30% and it has rallied. But when you think about it logically, I still think that Meta stock is looking undervalued and it's still not even that expensive. I mean, even on a forward PE basis, it's still only at 23 times next year's earnings, which really isn't that high for one of the highest quality businesses in the entire world with massive adoption, a massive moat, growing by over 20% annually, creating a leading frontier model, and also is now leading consumer agent AI. like that doesn't seem like a crazy price to me. So, no, I do not think that Meta stock is expensive here and I am probably going to continue building out my position and adding more shares when I can. I'm just pretty low on cash right now. And as I said, I do want to increase my liquidity as I am closing on a new house and then I have to sell my current house which does carry some costs. So, I am cashing up a little bit more right now just for my own personal life. But when I do have more liquidity available to me, then I'm probably going to continue increasing my Meta position, assuming it stays in what I think is a low price range. But with that being said, that is going to wrap up today's video. And if you enjoyed, then please remember to leave a like on it. And if you're new here and you want to see more content like this, then please consider subscribing to my channel as well. Also, please wish me luck on my final walkthrough that happens tonight and then closing my house tomorrow. If all goes well, then you guys should be seeing a brand new office in my new house very very soon because I'm planning on moving this weekend and then I'm going to be recording in my new office as soon as possible. So yeah, we're we're approaching like the final videos that you're going to see in this office that I've had on my channel for 7 years. But I'm going to stop rambling. So as always, thank you so much for tuning in. I truly do appreciate it and I hope to see you again in my next