There’s a huge discrepancy between Facebook’s Net Income and Free Cash Flow. Net Income is $22M and FCF is $15M. That might then be a case of a bigger capex than depreciation. That’s normal if it’s at least similar, but capex in Facebook is way bigger than depreciation. So what’s happening?
Probably Facebook is accounting growth investments in capex (growth capex), like bigger servers, more expensive training for employees, etc.
If I assume that the maintenance capex is similar to depreciation and then get to FCF using that maintenance capex, then the stock suddenly doesn’t seem stratospheric expensive. Still expensive, just not so much.
Originally published on 01/02/2019