Introduction

My thesis is that Meta (NASDAQ: META) faces challenges with capital allocation as prominent investors question its metaverse approach. Overall, Meta has tremendous buying power, but it’s important that it not be wasted by poor capital allocation decisions. Goal You need to make the right capital allocation decisions at the right time in terms of reinvesting in the business, making acquisitions, buying back shares, and issuing dividends.

The numbers

The 2021 10-K shows that Reality Labs segment operating income went from $(6,623) million on revenue of $1,139 million in 2020 to $(10,193) million on revenue of $2,274 million in 2021. Meanwhile, operating income from The Family of The applications segment went from $39,294 million to revenues of $84,826 million in…