TIP825: Meta, Adobe, Booking Holdings w/ Stig Brodersen, Tobias Carlisle & Hari Ramachandra

**SPEAKER_1** (0:00)
You're listening to TIP.

**Stig Brodersen** (0:03)
In today's episode, I'm joined by my friends and fellow value investors Tobias Kylile and Hari Ramachandra for another round of, dare I say, unloved stock pitches. We kick things off with Hari's pitch of Meta. The business is firing on own cylinders, yet the market has been selling off the stock, and we discussed whether investors should be worried about rising capital expenditures and whether Meta's competitive advantage lies in its AI models or in its unmatched distribution and data.
Now, Tobias walks us through Booking Holdings, one of the world's leading travel platforms. We debate whether AI systems could eventually replace travel aggregators altogether, or if Booking's relationships, networking effects, and position in the travel ecosystem makes its mode more durable than investors currently believe. And finally, I pitch the most unloved stock of them all, Adobe. The stock is trading near multi-year lows as the mug worries about, yes, you guessed it, the threat of AI.
And the recent departure of the CEO and CFO has not made the narrative more compelling. So we discuss switching costs and whether Adobe's biggest challenge is technological disruption or something completely different in a rapid changing environment. As always, there's plenty to disagree with, plenty to think about, and a few investing lessons along the way. So without further ado, let's jump right in.

**SPEAKER_1** (1:26)
Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you.
This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investment in the securities discussed. Now for your host, Stig Brodersen.

**Stig Brodersen** (2:11)
Welcome to The Investor's Podcast. I'm your host, Stig Brodersen. And today, as always, throughout these Mastermind Discussions, I'm here with Hari and Toby. Jens, how are you today?

**Tobias Carlisle** (2:22)
I'm well, Stig. Good to see you. Good to see you, Hari.

**Hari Ramachandra** (2:25)
Hey, Stig and Toby. Hello from India. Good to see you both.

**Stig Brodersen** (2:29)
Take it away.

**Hari Ramachandra** (2:31)
Awesome. My pick for this time is Metta. When I was looking at the recent shuffle in the market, I see many names falling down and Metta was one of them. Its share price from its peak has fallen down by 20 percent.
When I looked at the company, the business is pretty strong. They're one of the two best advertising machines ever built. In fact, they are on track to beat Google in terms of ad revenues. Their forecasted ad revenue for 2026 is $243 billion, which will be $3 billion more than Google's.
Their operating margin is very healthy at 41 percent, with a 46 billion free cash flow in 2025, a 30 percent net margin. Their revenue has been growing pretty healthily for last five years with an 18.5 percent CHGR revenue growth.
So what's the problem?
And the problem is something that is not new to Meta. They are very bold and very swift in making serious bets, and they put serious dollars behind those bets. Metaverse was one of them, which market got spooked when they didn't see much returns and they saw it as a money pit. VR Labs was another one, the Reality Labs. And this time, what has spooked market is their investments or their projected capex especially of 135 billion dollars into building their data centers and infrastructure for their AI. Their big bet that they are making, their first LLM Llama was not a big success. But recently, their super intelligence group came up with their latest model which has performed really well compared to other foundational models out in the market, which gives me confidence that one, they have the ability to come up with a good model. Two, as we are seeing that models are pretty much getting commoditized, that means the incremental difference between models is getting saturated, distribution becomes more advantageous. It's the distribution that matters. Whether it is Grok with XAI, Gemini of Google, Meta has a solid distribution. The second thing with Google and Meta is, they have a lot of use for AI to make their products better, to make their ad targeting better. So, they don't have to look for subscription model immediately. They can actually improve their profitability, their revenue streams for their existing products with AI.
But they're also trying to diversify into subscription. They are also looking into cloud business. But I'm not going to be accounting for those because those are still kind of things on the drawing board. So, my base case is that their network effects, their mode that comes out of it, the ability to use AI as a engine for their ad business, their pricing power, and then, the discipline they have exhibited, wherein, Zuck said in 2023 it's a year of efficiency. Even in 2026, they have reduced their workforce. So they're kind of not going off-hedge in terms of spending. So I'm hoping that that will continue. So my base case is based on these, they're able to recover their FCF margin and also the growth stabilizes without any re-rating of the price to earnings. I see a 46% upside from here. If they really hit the ball out of the park with their AI monetization, then it can be much more. So that's kind of my case for Meta. And I look forward to your feedback, Tobias Stig.