A review of Meta Platforms' latest earnings; An opportunity with the Joby Aviation sell-off; Two of Doug Kass' 2026 'surprises' are coming true today
1) In Wednesday's e-mail on the investment implications of the AI bubble bursting, I ranked the Magnificent Seven stocks from my most to least favorite. And I concluded:
Amazon, Alphabet, and Meta remain my three favorite large-cap tech stocks.
I'm more cautious about Apple and Microsoft. But that doesn't mean dumping the stocks if you own them.
Nvidia doesn't look like an outright "sell"... But it could be a good idea to lock in some profits if you have the opportunity.
And my view on Tesla remains the same as it has been – stay away from the stock.
It turns out my timing was impeccable...
Meta Platforms (META) and Microsoft (MSFT) both reported earnings after the market close on Wednesday... and their stocks went in opposite directions yesterday. Meta soared 10.4%, while Microsoft dropped 10%.
Today, I'll take a closer look at Meta's earnings. And I'll follow up with Microsoft's next week.
I've consistently been bullish on Meta since I named it as a core holding in my old firm Empire Financial Research's first newsletter on April 17, 2019.
Since then, through this morning, it's up 304% versus 139% for the S&P 500 Index.
The company reported incredible numbers for the fourth quarter of 2025 (you can see the company's full release here and slide presentation here).
Revenue grew 24% year over year ("YOY"), driven partly by daily-active-user growth of 7% YOY. Meta's family of apps (Facebook, Instagram, etc.) now has 3.58 billion daily active users.
"Ad impressions delivered" to these users grew 18% YOY, a nice jump from 14% last quarter. And Meta was able to charge a 6% higher average price per ad than the same period last year.
This chart from the presentation shows Meta's strong revenue growth over the past two years:
However, costs and expenses rose 40% YOY, faster than the 24% revenue growth. So expenses as a percentage of revenue rose somewhat YOY, but the percentage is flat over the past four quarters:
As a result, operating income only grew 6%. The tax rate declined from 12% to 10%, so earnings per share ("EPS") rose 11% to $8.88, surpassing estimates of $8.23.
The stock was also boosted by strong guidance for next quarter. The company expects first-quarter revenue of $53.5 billion to $56.5 billion, well above estimates of $51.4 billion.
Meanwhile, capital expenditures ("capex") jumped from $14.4 billion to $22.1 billion YOY. And management expects 2026 capex to be between $115 billion and $135 billion.
I asked for more insight from an old friend who knows the company better than just about anyone. I had also reached out to him for Meta's third-quarter earnings.
He e-mailed me back with permission to share his thoughts here:
It's simple this time: Stop panicking every time CEO Mark Zuckerberg blinks. Instead, use the opportunities when the Street takes a "very short-term view" to buy more. The fundamentals don't change from earnings call to earnings call. The users are not going anywhere. The margins are not collapsing. It's a strong, well-run business that's getting stronger as the network grows to almost the entire world and AI improves.
Buy it, set it and forget it...
Thank you for the insight, my friend!
That brings us to Meta's current valuation...
At around $722 this morning, the stock is trading at about 24.4 times the consensus 2026 EPS estimate of $29.64 (coming into the earnings report). That's in line with the S&P 500's forward multiple of 22 times to 24 times.
That means it's trading at a multiple near that of the average large U.S. business. Considering Meta is one of the greatest businesses of all time, that makes no sense.
Putting this all together, I still like Meta's stock at these levels.
2) Before my arm gets too tired from patting myself on the back...
My favorite speculative stock pick for 2026, Joby Aviation (JOBY), got whacked yesterday – falling 16.7%. It's because the company announced on Wednesday that it was raising $1.38 billion through convertible notes and new shares.
Specifically, Joby priced $690 million in convertible senior notes at a 0.75% yield and issued $690 million in new shares.
According to management, this is "to fund its certification and manufacturing efforts, prepare for commercial operations and for general working capital and other general corporate purposes."
Of course, taking on debt and diluting shareholders is a negative. But I think this will prove to be a smart move by Joby in the long run...
The main risk for early-stage companies like Joby is running out of cash. It's usually because it takes longer than expected to start generating material revenues and, eventually, profits – which often happens. (There's an old saying that any new business takes twice as long and costs twice as much to launch as even the most conservative projection.)
So with the capital raise, Joby just took its biggest risk off the table.
After a huge run-up, the stock has been nearly cut in half from its recent highs four months ago. I think the market is overreacting to the short-term news and giving a gift to investors with the courage to buy.
But, to repeat, this is my favorite speculative stock... and should be sized appropriately.
3) In yesterday's e-mail, I shared my friend Doug Kass' 10 surprises of 2026. And in another case of impeccable timing, two of them have come true today!
Doug's surprise No. 2 was: "In early 2026 Pres. Trump selects Kevin Warsh as new Fed chairman." Sure enough, that's exactly what happened, as this Wall Street Journal article reports.
This was an out-of-consensus prediction, as real-money-betting market Polymarket had Warsh at only 31.5% likely to get the nod as of yesterday.
Investors are greeting this news with a big yawn, as the market is pretty much flat. However, not surprisingly, economist Paul Krugman, a vocal critic of the Trump administration, has harsh words for Warsh:
So Kevin Warsh will be the next Fed chair. The silver lining to his appointment is that he shouldn't be able to do much damage, although with one big caveat (see below). The Fed is a republic, not a dictatorship; key decisions are made by a committee in which the chairperson has only one vote. Fed chairs can only drive policy through persuasion – and Warsh lacks the intellectual and moral credibility to be effective on that score. But God help us if we enter a crisis that requires decisive Fed leadership, the kind Fed chair Ben Bernanke showed during the financial crisis, or Jay Powell is now showing against Trump's attacks.
He continues with a prediction of how Warsh will fare:
Absent a crisis, my prediction is that the majority of Warsh's colleagues will largely ignore him, albeit without expressing their contempt openly. Even a coalition among the Trump appointees to the Board of Governors – Warsh, Bowman and Miran – won't be enough to overturn the responsible monetary policy stewardship of the other governors.
But that's a low bar, and it may be lower than is generally appreciated. For while I don't think Warsh will do too much damage to monetary policy, he, along with his fellow Trumper Michelle Bowman, the vice chair for financial supervision, may well eviscerate the Fed's role as a financial regulator.
As for what Warsh's appointment might mean for interest rates, Krugman writes:
As I write this, many media reports are describing Warsh as a monetary hawk. That's a category error. Warsh is a political animal. He calls for tight money and opposes any attempt to boost the economy when Democrats hold the White House. Like all Trumpers, he has been all for lower interest rates since November 2024.
If Krugman is correct that Warsh will push the Federal Reserve to cut rates, this is likely good for the stock market – at least in the short run.
My take: Warsh becoming Fed chairman doesn't affect my outlook on the economy or stocks.
And at the end of Doug's surprise No. 1, he predicted: "Precious metals, commodities and crypto currencies all collapse (after a strong start early in the year)."
Sure enough, Doug wrote me earlier today:
This morning, the metals market is getting destroyed:
- Gold – $280 (down 5%)
- Silver – $16 (down 14%!)
- Platinum – $390 (down 15%!)
- Palladium – $245 (down 12%!)
Once again, it's a good reminder that even something with big upside won't always move higher in a straight line. After an incredible run for precious metals in recent months, a breather like this isn't surprising.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.