Back when Stratechery started I wrote in the very first post that one of the topics I looked forward to exploring was “Why Wall Street is not completely insane”; I was thinking at the time about Apple, a company that, especially at that time, was regularly posting eye-popping revenue and profit numbers that did not necessarily lead to corresponding increases in the stock price, much to the consternation of Apple shareholders. The underlying point should be an obvious one: a stock price is about future earnings, not already realized ones; that the iPhone maker had just had a great quarter was an important signal about the future, but not a determinant factor, and that those pointing to the past to complain about a price predicated on the future were missing the point.
Of course that is exactly what I did in that tweet.
Ben has a long write-up on the Facebook financial news and how one can look at the data:
To be clear, I agreed with the Apple-investor sentiment all along: several of my early articles — Apple the Black Swan, Two Bears, and especially What Clayton Christensen Got Wrong — were about making the case that Apple’s business was far more sustainable with much deeper moats than most people realized, and it was that sustainability and defensibility that mattered more than any one quarter’s results.
The question is if a similar case can be made for Facebook: certainly my tweet taken literally was naive for the exact reasons those Apple investor complaints missed the point five years ago; what about the sentiment, though? Just how good of a business is Facebook?
As with many such things, it all depends on what lens you use to examine the question.
He looks at Facebook using several different “lenses”: finances, products, ad infrastructure, multiplying moats, and reason for being (Facebook’s Raison D’être). While I follow his various lines of thinking, I think Ben spends a little too much effort on linking back to things he already said and not enough on expanding upon those thoughts. This is most apparent in his moats lens which needs fleshing out (it feels half-baked).
As it stands it’s a useful exercise in understanding a company’s financial and business drivers. Obviously, any discussion of Facebook will include security and privacy (and GDPR and …). Too often professionals in our industry fail to consider these things fully which leads us to the cyber security startup VC and blockchain bubbles we’re in.