I am considering making an investment, of sorts. Perhaps it is more gambling than investing. But I would like to put money on the claim that Facebook stock will be substantially lower (below $250 per share) in January 2023 (current price: $370). There are a few reasons I am bearish on Facebook, some of which should be reflected in the stock price by the beginning of 2023:
Facebook is no longer really a growth stock in any sense. It has reached market saturation. It has no chance of entering China, and has a majority market share in every other country of note. Zuckerberg’s talk of becoming a “metaverse” company sounds like classic late-stage corporate bullshit.
The current P-E ratio of 30 is fairly high, even considering the extremely good profit margins. Unless Facebook does continue to show growth, the stock price will surely fall.
There is substantial anti-trust risk, both in the US and Europe. I can imagine several remedies that would impact Facebook ad profitability.
There is substantial risk of competition. New social networks seem to spring up every two or three years. The “next TikTok” should arrive in 2022.
There is substantial risk of governments offering a complementary product; a National ID system that lets you identify your friends and family and communicate through some form of Digital Mail. With all the concerns and desires regarding vaccination passports, I am somewhat surprised nobody has done this already.
Moore’s Law is dying. The issues caused by physical limits of reality are getting more severe. Rowhammer attacks. Faulty CPUs. DNA storage is a bad joke by people who have never used tape libraries. Very soon, computers will stop getting smaller and faster and cheaper. And Facebook’s future-cost model will look more expensive.
The problem with this is structuring the investment to be profitable. If I simply buy Jan 2023 PUT 250 options (current price 13.80), I can spend $41400 on 30 contracts, equivalent to being short 3000 shares. If FB does close at $250 in January 2023, those contracts are worth … literally nothing, I have lost my whole investment. If FB closes at $350 in January 2023 and then drops to $150 by the end of the year, I have still lost my whole investment. If FB closes at $200 in January 2023, those contracts are worth $150000, a substantial profit. But I am not sure I am so confident of timing this correctly; I would want more than a 3x return of risk here.