Meta Platforms Pref Share METAM 6.5 08/15/29

METAM

49.5900.90% ( +0.440 )

Trading: Nov 2, 15:07:46 (EDT)

What Is Going On With Meta Platforms Stock on Monday?
benzinga_article·Nov 2, 2026 at 03:34 PM
- Meta Platforms Inc. is facing increased investor scrutiny and credit rating pressure due to rising capital expenditures and aggressive artificial intelligence investments. - S&P Global Ratings revised Meta's AA- credit rating outlook to negative, projecting capital expenditures to reach about $140 billion in 2026 and exceed $225 billion in 2027. - Financial analysts and portfolio managers have reduced their holdings or turned cautious on the stock amid concerns over negative free cash flow, massive future commitments, and equity dilution.
META-0.54%METAM+0.90%
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GOOGL 3Q26 First Take: Q3 disappointed, with ad growth, Cloud growth, and Services margin all missing buyside expectations. For a name already battling a tougher narrative, even after a sustained pullback (shorts dominated over the past month and the stock fell below $300 after hours, nearing the divergence-entry zone Dolphin Research flagged last quarter), this print is likely to keep a lid on valuation via weaker sentiment.Key Takeaways:1) Search slowdown; AI erosion narrative playing outSearch ad growth was 12% in Q3, a clear QoQ decel. In a heavy AI investment phase, with margins and FCF under pressure, a slowdown in the core franchise is the most damaging outcome for GOOGL and lends credence to the AI erosion narrative.Ahead of the print, third-party data showed share losses in Search and the EU's DMA weighed on travel queries, and the stock’s pullback already signaled positioning and expectations resetting. Actual results still came in worse than feared.Meanwhile, the market had not-low expectations for YouTube given the World Cup and elections, yet growth also slowed meaningfully off a high base. With YouTube skewed to brand ads, this typically reflects macro sensitivity and some share shift to performance ads on social platforms.2) Cloud still surging, but the bar was highCloud (incl. TPU sales) grew 103% in Q3, an acceleration QoQ. However, the sell-side and buyside bars had moved higher than BBG cons. (+91%), with many at ~+105% (sell-side) and ~+110% (buyside).Backlog reached 561 bn in Q3; adding recognized revenue back implies TCV adds of 77.7 bn, roughly in line with Q2 and up ~1 bn, suggesting demand remains solid. Based on channel checks, the miss vs. elevated expectations likely ties to TPU shipment timing, e.g., a one-quarter delay for v8i.For Cloud granularity, watch for the split of how much TPUs contributed (management noted a material contribution) and the impact from v8 delivery delays. The call should offer more color on mix and shipment cadence.3) Margin pressure from elevated AI spendGroup operating margin fell 50bps QoQ in Q3, driven by higher D&A and R&D, pointing to compute infra build-out and foundation model training. By segment, Google Services margin fell 100bps QoQ, while Cloud margin improved QoQ (note: this excludes model training expenses), one of the few upside spots in the print.4) Heavy Capex widens the FCF gapCapex was 51.4 bn in Q3, doubling YoY and still accelerating, reaching 40% of revenue. This drove FCF deeper into negative territory at 9.1 bn.GOOGL continued executing the 85 bn 2026 funding plan, issuing 12.5 bn of equity this quarter with 27.6 bn capacity remaining, and also sold 28.7 bn of unsecured notes in Q3. In theory, cash on hand plus short-term investments and the remaining capacity should largely cover the funding gap over the next two years. $Alphabet - C(GOOG.US) $Alphabet - C(GOOG.US)
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Less than a week after earnings, META moved to execute its 'cash grab' plan. It announced two concurrent underwritten offerings pre-market totaling approx. $35bn:$22.5bn Class A common: Issued via forward sale agreements with Morgan Stanley and Goldman Sachs, with no upfront cash to the company. Settlement will be timed at META's discretion by Nov 19, 2027.$12.5bn mandatory convertible preferred: 250mn depositary shares under ticker METAM, mandatorily converting into common around Aug 15, 2029 at a floating rate. The dividend rate will be set at pricing.Each tranche also includes a greenshoe of $3.375bn and $1.875bn, respectively. NVIDIA, AMD and Broadcom intend to subscribe up to $5bn of common, on a non-binding basis. After Class C begins trading (Q1 2027, post the Jan 19 1-for-1 stock dividend), the company plans an approx. $60bn Class C ATM program (shares sold into the market over time, not an overnight secondary; shares are freely tradable upon sale), with no banks yet mandated.Dolphin view: 'Alternative pricing' in the money-raising phaseIn our earnings take, we noted the Class C setup is essentially pre-arranging a financing channel for future spend. Intermittent issuance should prevent excessive bullish froth.Today puts numbers to that placeholder, but near-term real dilution is modest, easing some nerves. However, it does not remove the valuation overhang from ongoing financing expectations.(1) Size: Assuming ~$650 per share, the full $95bn implies ~146mn shares, ~5.7% of the current 2.556bn shares outstanding. Including greenshoes, roughly ~6% (est.).(2) Pace: This will not hit all at once. The $22.5bn Class A forwards settle in tranches over 13 months, the $60bn Class C ATM would be dribbled out through 2027, and the $12.5bn preferred does not convert until 2029.(3) Overhang: Versus historical $20–30bn annual buybacks, from 2027 there will be sellers with $60bn of stock to place. It is not a dump; spread out, daily flow impact at ~2.5% of volume is not large, but sentiment could still be capped.How big is META's funding gap?Quick math: we model 2027/2028 revenue at $312bn/$368.6bn (+22%/+18% YoY). At a 55% OCF margin, that implies OCF of $171.6bn and $202.7bn.Capex in 2027/2028 could reach $220bn/$250bn, implying FCF gaps of roughly -$50bn and -$50bn, or -$100bn combined.META currently holds $82.5bn cash, with no short-term debt and only long-term bonds outstanding. On a conservative view, near-term funding needs are close to $20bn.In other words, the announced $35bn A + the planned $60bn C, $95bn in total, would be sufficient to cover the next two years' gap.One caveat: if 'Muse' blows out demand (as we also flagged in our earnings take), the compute deployed over the next two years may prove insufficient. Capex could be lifted above the assumptions noted.Valuation update: If the full $95bn is issued and converted, dilution would be ~6%. We keep our valuation framework from the earnings review: add near the bearish case, take profits near the bullish case.Total equity value unchanged; per-share adjusted for dilution, our bear/base/bull cases are $508/$705/$790, respectively. Given the resilient ads base with relatively low AI cannibalization risk, and Muse potentially reinforcing the ecosystem entry point, we would look to add on pullbacks.Risk disclosure and statements:海豚研究免责声明及一般披露
Oct 26, 2026 at 12:28 PM
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