Buy META
Key Financial Metrics
Fealty’s Foundational Reasons
Growth Projections: Meta has impressive current earning growth projections of 34.3%, one-year earning growth projections of 16.4%, and five-year earnings growth projections of 30.0%.
Economic Moat: Meta has a strong competitive moat that has allowed it to maintain a leading position in the social media and digital advertising industries.
Visionary Leadership: Zuckerberg has consistently demonstrated foresight in understanding where technology can and should move. His early recognition of the potential of social networking led to the creation of Facebook, and his vision for future technologies has driven the company’s pivot towards building the metaverse.
Commitment to Long-term Goals: Zuckerberg is known for his focus on long-term strategies. This is evident in his investments in virtual and augmented reality, despite the immediate profitability of these ventures being less certain.
Margin of Safety: Based off of our calculation of Meta’s intrinsic value of $604.42, the current price of $394.98, leaves a healthy margin of safety.
Meta’s Origins and Revenue Streams
Meta Platforms, Inc., formerly known as Facebook, Inc., was founded by Mark Zuckerberg in 2004. Initially created as a social networking service for Harvard students, it rapidly expanded and became the world's largest social network. Today, Meta not only encompasses Facebook but also owns several other major platforms including Instagram, WhatsApp, and Oculus, making it a powerhouse in social media, digital communication, and virtual reality.
Meta’s growth strategy has historically focused on user acquisition, engagement, and monetization through targeted advertising. It has successfully scaled its operations worldwide, except in countries that ban or restrict its services. Acquisitions have also played a critical role in its expansion and diversification strategy, notably the acquisitions of Instagram in 2012 and WhatsApp in 2014. Looking forward, Meta is heavily investing in the development of the metaverse, aiming to pioneer this new interactive digital realm.
Meta generates most of its revenue from advertising. Businesses use Meta's platforms to target specific demographics, leveraging vast amounts of user data to deliver highly personalized advertising. Meta's business model capitalizes on its extensive global user base, innovative advertising technologies, and sophisticated data analytics capabilities. Additionally, the company is investing in new revenue streams including hardware products like VR headsets, and is exploring opportunities in the digital payments and e-commerce sectors.
Meta reports financial results through two reportable segments: Family of Apps (FoA) and Reality Labs (RL).
Family of Apps - 99% of Revenue
Facebook. Facebook helps give people the power to build community and bring the world closer together. It's a place for people to share life's moments and discuss what's happening, nurture and build relationships, discover and connect to interests, and create economic opportunity. They can do this through Feed, Reels, Stories, Groups, Marketplace, and more.
Instagram. Instagram brings people closer to the people and things they love. Instagram Feed, Stories, Reels, Live, and messaging are places where people and creators can connect and express themselves through photos, video, and private messaging, and discover and shop from their favorite businesses
Messenger. Messenger is a simple yet powerful messaging application for people to connect with friends, family, communities, and businesses across platforms and devices through text, audio, and video calls.
Threads. Threads is an application for text-based updates and public conversations, where communities come together to discuss topics of interest. People can connect directly with their favorite creators and others who love the same things or build a loyal following of their own to share their ideas, opinions, and creativity with the world.
WhatsApp. WhatsApp is a simple, reliable, and secure messaging application that is used by people and businesses around the world to communicate and transact in a private way. Within WhatsApp we launched WhatsApp Channels, a one-to-many broadcast service designed to help people follow information from people and organizations that are important to them.
Reality Labs - 1% of Revenue
Meta Platforms, Inc. is deeply invested in the metaverse, directing substantial resources toward pioneering long-term research and development. These ventures encompass cutting-edge technologies that may not yet be commercially available but hold the potential to redefine human interaction and digital connectivity over the next decade. Among these are advancements like neural interfaces using electromyography, which allows for the control of devices through neuromuscular signals, and significant innovations in AI and hardware aimed at crafting next-generation user interfaces.
In the more immediate landscape, Meta continues to refine and expand its Reality Labs products, creating early metaverse experiences that emphasize human connection, transcending the limitations of physical distance. Their current virtual reality (VR) offerings through Meta Quest devices and the Meta Quest Store include a variety of social, gaming, fitness, and entertainment experiences. For instance, Meta Horizon Worlds serves as a dynamic social platform where users can engage with others, participate in activities, and attend virtual events.
Further driving the adoption of VR, Meta has introduced mixed reality (MR) capabilities. Devices like Meta Quest Pro and Meta Quest 3 merge the immersive experience of VR with the tangible aspects of the physical world, enhancing user interaction and presence.
Meta's augmented reality (AR) ambitions are equally forward-thinking, marked by developments such as the Ray-Ban Meta smart glasses. These glasses incorporate Meta AI, support livestreaming capabilities, and promote hands-free interaction, allowing users to stay more engaged with their surroundings. Additionally, Meta Spark offers a platform for creators and businesses to develop AR experiences that seamlessly integrate digital elements with the physical world across Meta’s applications.
Overall, while Meta’s investments are broadly aimed at building the foundational elements of the metaverse, they also emphasize more immediate objectives. These include the development of VR and social platforms with specific market-ready products and services, alongside more explorative AR projects which remain focused on longer-term research. In 2024, Meta plans to allocate significant portions of its Reality Labs budget to these initiatives, reflecting a strategic balancing of near-term deliverables with visionary technological advancements. This allocation underscores Meta’s commitment to continuously evolving its product strategies and offerings in response to emerging technological challenges and market dynamics, ensuring that their initiatives not only anticipate but shape future technological landscapes.
Why is Meta a Buy Now?
Investing in Meta Platforms, Inc. presents a compelling opportunity for those looking to diversify their portfolio with a robust blend of innovation and resilience. Meta owns some of the world’s leading social media and communication platforms, such as Facebook, Instagram, WhatsApp, and Messenger. This diversified portfolio not only mitigates risk but also taps into varied user demographics and global markets. Such a strategic position enables Meta to continuously generate strong revenue and maintain financial stability, empowering the company to pursue long-term growth opportunities, weather economic downturns, and potentially return value to shareholders through buybacks or dividends.
Under the visionary leadership of Mark Zuckerberg, Meta remains at the cutting edge of technological innovation, particularly in areas like social media, virtual reality, and the burgeoning metaverse. This relentless drive towards pioneering new digital landscapes is pivotal for staying ahead in a rapidly evolving tech environment. For instance, Meta's commitment to augmented and virtual reality technologies, demonstrated by the widespread adoption of Oculus VR headsets, shows promise in capturing significant market share in sectors poised for substantial growth.
Meta's sophisticated advertising technology, which leverages extensive user data, enables the delivery of highly targeted ads. As digital advertising continues to expand, Meta's platforms become increasingly invaluable to advertisers seeking precision and effectiveness in their campaigns. Moreover, as Meta pivots towards creating the metaverse—a collective virtual shared space that merges enhanced physical and digital realities—the company positions itself as a potential leader in redefining how technology interfaces with everyday life.
The robust nature of Meta Platforms, Inc. is underscored by the inherent strength of its business model, which flourishes as more individuals engage with its platforms. This increase in usage not only enhances the intrinsic value of its services but also fortifies barriers against competitive entry, cementing Meta's position in the market.
Meta’s extensive global presence is another cornerstone of its strategic advantage. With a reach that spans across diverse geographic regions, Meta leverages this scope to ensure operational scalability and mitigate risks associated with local economic variances. This widespread footprint is pivotal in maintaining a steady performance amidst the ebb and flow of regional market dynamics.
Meta’s Potential Pitfalls
Regulatory Challenges
Meta faces significant regulatory scrutiny across various markets. Issues such as data privacy, misinformation, and antitrust concerns could lead to heavy fines, restrictions, or even forced changes to its business practices, impacting profitability.
Public Perception
Meta has encountered numerous public controversies concerning data privacy, political misinformation, and content moderation. These issues can affect user trust and engagement, potentially leading to a decline in user base and attractiveness to advertisers.
Competition
Meta competes with other tech giants in social media, digital advertising, and new sectors like AR/VR. Companies like Google, Apple, Amazon, and Microsoft pose competitive threats, which could impact Meta's market share.
Innovation
Meta's pivot towards building the metaverse and other new technologies involves substantial R&D spending without a guaranteed return on investment. If these initiatives fail to meet expectations, it could significantly impact the company’s financial health and stock price.
The Ideal Investor
If you like innovative tech plays, at a reasonable price, and are willing to stomach the volatility that comes along with the potential for substantial growth, you may be the Ideal Investor for META.
Who Might Look Elsewhere
If you are concerned about the competitiveness within the AI space, dislike high volatility, or have moral qualms about the potential negative impact of social media or targeted marketing on privacy, you may want to consider a different company to invest in.