- Facebook operates all-in in the metaverse, a whole new digital world, and changes its name accordingly.
- Mitch Rubin, CIO RiverPark Funds, says the bold move should pay off for Facebook shareholders.
- Rubin also named eight stocks to buy for game-changing innovations in the coming years.
Facebook has recently made a major rebranding. And unlike Google, whose relaunch in 2015 under the name Alphabet gave it a nickname well known to the masses, the new name Facebook “Goal” is probably less familiar, and therefore a bolder choice.
And it will pay off, says Mitch Rubin, chief investment officer of RiverPark Funds. Facebook is one of the largest holdings in Rubin’s RiverPark Large Growth Fund (RPXFX), which, according to Rubin, is looking for “the potential for transformational growth at a reasonable price.”
For those unfamiliar, the metaverse is a term for a fascinating digital world that many, including Mark Zuckerberg, see as the next frontier of the Internet. Just as the concept of the Internet was incomprehensible 50 years ago, the metaworld will bring unforeseen technological opportunities, say supporters.
Facebook, which Rubin called a “grand business” with some “growth pains” as it deals with scrutiny by journalists, regulators and the public, hopes to be completely reborn from a ubiquitous but controversial social media company to the king of the metaverse. .
Rubin said he was “skeptical” that Facebook’s new business model from the metaverse would stumble, at least in the short term, given its strong experience.
“I definitely think this leadership has benefited from the doubts,” Rubin said. “It’s a very, highly profitable business that also spits out a ton of cash. Who is better than them to understand [if there] Are there any interesting things you can invest this money in to make this business better, stronger and bigger in the future? ”
As for stocks in particular, Rubin’s optimism about the metaverse extends to a bullish forecast of the share. Even if the company’s strategic changes do not affect profits for many years, the shares will still win in the near future, he said.
This is because by restructuring and removing side projects of the metaverse from its core business, it is becoming easier for investors to evaluate Facebook, Rubin said. The company shared that its spending on the metaworld this year will reduce its operating profit by $ 10 billion.
Thus, Facebook’s core business looks even more profitable, Rubin said, given that its operating profit would have been $ 10 billion higher if it had not participated in the metaworld. The market is currently estimating Facebook’s division of the metaverse at minus $ 10 billion, Rubin said, but even skeptics of the metaverse need to understand that someday the technology could become profitable.
“If you value the things they work on in the metaverse, then you have stocks with cheaper [price-to-earnings ratio] plus the book value of assets, – said Rubin. “This transparency allows people to focus on the profitability of the business, and, in the end, if some value comes from this other segment, it will be a cost-plus, not a cost-minus.”
Facebook shares remain cheap and “undervalued,” Rubin said, as its price-to-earnings ratio remains 23.2 times much lower than the S&P 500, despite significant revenue growth. Rubin expects the shares, which rose 3% after the announcement of the name change, to continue to rise.
“I do not have enough data for analysis [the metaverse], but I don’t pay anything for it, and I receive it free of charge, – Rubin told. – And if they come up with something, it’s a team of managers who created, you know, a trillion dollars. Appreciate the business of a dorm room. ”
Innovation outside the metaverse
The metauniverse is not just a destructive technology that potentially attracts investors. Rubin also shared six actions in the field of technology and health care, in which he sees opportunities. Below is each name along with its ticker, market capitalization, P / E ratio, and Rubin thesis.