A New Company Name, With the Same Powerful Trophy Assets

Regular Stansberry Research readers know the power of investing in "Trophy Assets"...

These are unique assets that are impossible for other companies to replicate... and give firms a huge advantage over the competition.

Look at assets like Disney's (DIS) movie franchises and theme parks... or Manchester United's (MANU) football franchise... or even the Empire State Building. All of these assets are one of a kind and recognized around the world.

Trophy Assets can be digital, as well. A few good examples are the Facebook and Instagram social media platforms, and the Messenger and WhatsApp messaging platforms. They are four of the five largest social media networks in the world. And all of these Trophy Assets are owned by Facebook... well, it used to be called Facebook.

In late October, Facebook's holding company changed its name to Meta Platforms (Nasdaq: FB). The company will continue to trade under the FB ticker until December 1, at which point it will begin trading under MVRS.

The company said the new name reflects a move past its social media roots to a new level of social connection called the "metaverse" – an online realm that provides enhanced ways to connect, work, play, and shop.

Although its business operations will not change, the company will now divide its financials into two new sections:

• Family of Apps: This includes the social media apps mentioned earlier.
• Reality Labs: This includes Meta's virtual and augmented reality platforms.

While the name change reflects a shift in Facebook's thinking – beyond just social networking – that doesn't mean that its portfolio of social media apps has lost its luster...

Meta's flagship Facebook app continues to grow. In the most recent quarter, it reported 2.91 billion monthly active users (MAUs), up 6% from the same quarter in 2020. And two-thirds of those MAUs, or 1.93 billion people, use the Facebook app every single day.

And when you include Meta's other apps, the user numbers get even larger... 3.6 billion people use the sites within its Family of Apps every month. And 2.8 billion of these individuals use one of these apps daily.

All of these eyeballs on Meta's apps drive its online advertising business. After all, Meta doesn't charge users a subscription to sign up for these apps. Instead, the company makes money by selling ad space on its platforms.

So, the more people who join Meta's apps, the more advertisers will want to team up with the company and showcase their products and services. And when people join Facebook, Instagram, or WhatsApp, they typically bring along their friends as well. This grows the user base even more, increasing online advertising demand once again.

So, as the number of Meta app users grows, the more people are likely to join the social-networking platforms and stay there. This "network effect" is what makes Facebook's social media platforms so valuable. Advertisers are eager to get their companies and products in front of all of these eyeballs. And Facebook gives them much more than just massive reach... With all of the information the company collects on its users, advertisers can target very specific types of potential customers. So they are willing to pay much more to advertise.

But over the past year or so, investors have grown concerned over slowing growth. Throughout the pandemic, many advertisers pulled back on spending to make sure their businesses could handle any pandemic-related disruptions.

That led to a decline in average revenue per user ("ARPU"). But this trend has reversed, and ARPU is growing once again. Not to mention, many companies would kill for Facebook's "slow," 22% revenue growth last year. And it's on track to accelerate that growth to more than 30% this year.

The company is also seeing regulatory and political risks...

Most recently, a whistleblower testified before Congress about the company's workplace culture, saying that Meta consistently puts profits ahead of the "greater good" on its social media sites.

But we believe that Meta will get past this scandal, just like it has with others in the past...

Meta is still growing at a solid pace. At the end of the day, advertisers will continue to pay up to get their businesses in front of the billions of people using Meta's apps.

All in all, Meta has a fabulous business model... It's an incredible, highly scalable and capital efficient business... one of the best that has ever existed.

Meta turns around $0.30 of every dollar of sales into free cash for its shareholders. That amounted to nearly $36 billion over the past 12 months. All of this should propel shares even higher.

Sometimes investing is simple.