META Stock Outlook: Zuck's $5 billion bet on Ray-Ban signals boost...
The latest news on Meta Platforms stock is not as “risky” as you might think. Meta-platforms (NASDAQ: META) stock has just received some interesting news. The Wall Street Journal reported Meta was in talks about acquiring a minority stake in EssilorLuxottica (OTCQB: ESLOY), the parent company of Ray-Ban sunglasses. Meta Platforms stock could benefit from the deal.
Zuck's $5 Billion Bet on Ray-Ban
For those who don’t know the 1983 film "A Risky Venture," Tom Cruise’s character wore a pair of Ray-Bans, which helped revive the iconic brand. Meta, which is now owned by EssilorLuxottica, is interested in acquiring 5% of the Paris-based company, which has a market capitalization of 88 billion euros ($96.0 billion). Like Hollywood, Mark Zuckerberg wants to pay $5 billion for the minority position. Is this just vanity or is there more to the billionaire’s latest idea?
EssilorLuxottica is already working with Meta on its smart glasses, so maybe the move isn’t so crazy after all.
Wearable AI and Meta Glasses
One of the few technology companies that has made the transition from tech geeks to mainstream consumers is Apple (NASDAQ: AAPL). And it is these people who are competing with Meta in the wearable AI race. Joining forces with EssilorLuxottica, a company that knows a lot about eyewear design, is a smart move if Zuckerberg wants to take the AR/VR side of his business in that direction.
The latest version of the glasses allows users to live stream what they see directly to Facebook and Instagram. In the US, the glasses are integrated with Meta’s artificial intelligence assistant, allowing owners to ask the glasses for more information about what’s in front of them, according to the "Financial Times."
Investment Impact
Meta Platforms’ stock benefits from strong cash flow. The company generated free cash flow of $12.53 billion in the first quarter, almost double the previous year’s figure. The company’s investment in EssilorLuxottica would account for 40% of its free cash flow in a quarter. For Zuckerberg and Co., that’s a drop in the ocean.
Future Projections
Over the past five years, the company’s shares have delivered a mediocre return of 62%. If the company repeats this lackluster performance over the next two five-year periods, the $5 billion could be converted into $13.12 billion in a decade, for total profits of $9.39 billion.
This is child’s play.
Disclaimer: At the time of publication, the author had no position in the securities mentioned in this article.
