Meta Platforms: Still Waiting For A Breakthrough And Revaluation (Rating Upgrade)
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Anton Davydkin206 FollowersFollow5ShareSavePlay(11min)Comment(1)SummaryMeta Platforms is upgraded to Buy, reflecting strong core business metrics and undervaluation relative to historic P/E multiples.META's Family of Apps segment delivers robust profitability, with net profit margin above 30% and ROIC exceeding 23%, underscoring competitive advantage.Heavy CapEx—$62.7B TTM, 84% of net profit—targets AI and Reality Labs, but success in Reality Labs remains elusive and is a key risk.At 23.3x P/E, META offers nearly 12% upside to fair value; regulatory and Reality Labs execution risks warrant close monitoring. EvgeniyShkolenko/iStock via Getty Images Investment Thesis This is my third review of Meta Platforms (META) (META:CA). While bullish on the stock in previous reviews, I still maintained a hold rating. However, after updating my calculations three quarters after myThis article was written byAnton Davydkin206 FollowersFollowI am a qualified economist specializing in economic theory and I have been investing and trading since 2005. Since 2018, I have been investing in US equities. Until 2022, I was part of TopStepTrader, having passed the combine for a funded trader. I am a conservative investor, and for a long time, I have been using my model for evaluating companies, based on a mix of quantitative and fundamental analysis. This model allows me to assess objectively almost any public business and answer the question of investment attractiveness. The exceptions are banks, insurance companies and REITs - my analysis does not cover them. I focus on comprehensive and in-depth analysis of financial statements of mega and large caps, trying to update my vision every quarter. My main investing strategy is to regularly buy shares with a portion of my income that I want to hold forever. I want to combine my writing and research skills with my passion for financial statement analysis to give private investors an independent view of large and well-known companies from a facts and figures perspective. My main motivation is to help private investors make informed and well-founded decisions by demonstrating my approach to analysis.Analyst’s Disclosure:I/we have a beneficial long position in the shares of META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I use a buy rating, but my approach would be better served by a rating scale from avoid to attractive. Attractive status or buy rating relative to META stock is based solely on an analysis of the financial performance of the business without an assessment of the current value, although this analysis will also be carried out towards the end of the article. My opinion may be useful to investors considering whether to include the stock in a long-term portfolio and hold it for a 3-5 year horizon, and it does not constitute a recommendation or trading instruction.Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsWhat justifies the Buy rating on META at current levels?META's quantitative metrics yield a 73/100 score, core business remains highly profitable, and shares trade at a 23.3x P/E—below the 26.1x median—implying undervaluation and upside.How do escalating CapEx and Reality Labs investments impact META's risk profile?CapEx at 84% of net profit is aggressive but justified by AI and tech competition; however, lack of Reality Labs success and rising expenses could pressure margins if not offset by tangible returns.What are the primary risks that could undermine META's investment thesis?Failure of Reality Labs to deliver results and intensifying regulatory actions—especially in advertising—pose significant threats to margins, capital allocation, and the overall investment case.Recommended For You