Shares in Facebook, uh Meta Platforms, continued to fall on February 7.
The most recent price, about $230/share, is just 16 times last year’s earnings. Considering that the average stock in the S&P 500 now has a PE of over 25, and that Facebook is bringing a quarter of its revenue to the net income line, that’s absurdly cheap.
It’s cheap because analysts are reading a shortfall in growth as a harbinger of doom. The three main apps – Facebook, Instagram, and WhatsApp – are losing popularity because people don’t trust the company. A lot of its future gains are going into “metaverse” software that analysts don’t understand.
But the analysts who now value the company at barely $600 billion are ignoring a key point. Facebook’s value isn’t in its software. Its value lies in its data centers. It now has 15 cloud data centers, mostly in the U.S. These hyperscale data centers have incredible value. They’re not valued because Facebook has chosen to only run its own services in its cloud. Facebook is also one of the primary investors in the latest globe-girdling fiber optic cables, including one around Africa.
The answer then is very simple. Rent. Facebook should be offering its cloud capacity to other services. Game services. Social media services. Even business services. Just the announcement that Facebook will rent its cloud capacity will juice the stock.
It can get new customers on price, and reach. Facebook dominates communications in the global south. No one beats free. Billions of people in India, in Southeast Asia, in Africa and Latin America now depend on the company’s free services. Anyone renting Facebook’s capacity gets that global reach.
Who might be interested? There are dozens of companies across India that might like a cheaper cloud solution. The same in Southeast Asia.
More important for investors, the announcement that Facebook’s network is available would change the subject, away from its weaknesses, toward its strengths. The stock would zoom upward. Analysts would suddenly decide it’s undervalued. Facebook would be seen as raising profitable cash it could then pour into new services.
It’s a guaranteed win-win.
