Meta Platforms, Inc. (FB, Financial) (the renamed Facebook) built on 2020’s strong financial performance by growing revenues 37% in calendar 2021 versus 2020. GAAP operating profit increased by 43% and diluted earnings per share increased by 36%. Like Alphabet, Meta Platforms benefited from increased user engagement as the ongoing pandemic increased online activity.
Popular sentiment regarding Meta plummeted in late 2021 in the wake of Frances Haugen’s well-documented criticisms about content moderation decisions taken by Meta management. We welcome the scrutiny of the practices at Meta and indeed of all important social platforms. We hope and expect that Meta will significantly and continuously improve its handling of misinformation and harmful content, and that 2022 will mark a turning point in the company’s approach to user engagement.
In its 2021 earnings report, Meta disclosed an operating loss of $10 billion in its Reality Labs division. Remarkably, Meta generated operating income of nearly $47 billion in 2021 even after factoring in the heavy burden of its AR/VR investments. That said, management highlighted increased competition to its social media platforms from TikTok as well as a significant headwind to revenue created by Apple’s changes to IDFA. These concerns took the company’s already-battered stock lower. We believe Meta remains the world’s top social media company and can continue to grow its business faster than GDP for quite some time, even as it establishes an early beachhead in the next generation of computing platforms. In our estimation, it is an above-average business with a stock selling for a below-average multiple.
From Ruane Cunniff (Trades, Portfolio)'s Sequoia Fund 2021 annual report.
