Meta Platforms – Change of the guard

The cash register retires.

• Meta Platform’s most important executive has decided to retire leaving some very big shoes to fill by Javier Olivan who has been responsible for building the international user base.
• Sheryl Sandberg, COO of Meta Platform is retiring to pursue philanthropy after 14 years at the company and there is no reason to think that her retirement is not genuine.
• This is because I have long viewed Ms Sandberg as the most important executive in the company.
• While Mark Zuckerberg has always been out front amping his vision of the future, it has always been Ms Sandberg who has followed in his wake and turned these ideas into money.
• Effectively, Ms Sandberg is the cash register of Meta Platforms having built the advertising business from scratch and also managed the transition from fixed to mobile right after the IPO.
• It is thanks to Ms Sandberg that Mark Zuckerberg can afford to blow $14bn a year on the Metaverse and she will be sorely missed by the shareholders.
• Javier Olivan is relatively unknown outside of Meta Platforms, but there is no reason to think that he will not be a competent replacement.
• He certainly knows how to execute as he is responsible for building the user base outside of North America which now makes up 91% of all the users.
• However, it only makes up 55% of revenues meaning that users in North America are far more valuable to Facebook than users in other countries.
• This tends to be true for all of the North American digital ecosystems that use advertising for monetisation, and so I am not convinced that this represents a revenue growth opportunity.
• Given how important Ms Sandberg was to Meta Platforms, her retirement represents a key moment in the history of the company.
• It increases execution risk until there is good visibility on how well Javier Olivan will be able to execute the role of COO.
• It also comes at a difficult time when the company is labouring under a series of headwinds from Apple, from inflation and from regulators all of which are restricting revenue generation.
• Hence, I think the risks of investing in Meta Platforms have increased slightly but I am reasonably optimistic that this is temporary, and that Meta has made a good choice in replacing Ms Sandberg.
• The shares remain fairly inexpensive relative to their peers but in this time of inflation and raising interest rates, growth is probably not the best place to be.
• I remain fairly indifferent to Meta shares as they are pricing in a lot of bad news but there is no immediate catalyst on the horizon to underpin a recovery in the share price.