Meta Platforms - An Opportunity Hidden in Plain Sight
Hi there,
Last month I finally invested in Meta Platforms, a company that has been on my radar for quite some time.
The last time I seriously considered Meta was back in 2022. At that time, it (briefly) traded at 9 x earnings. As you may recall, all market commentators had soured on CEO Mark Zuckerberg. Meta’s price crashed 77% from $384.33 to $88.10 at the low. It then went on600+% run over the next 2 years.
In hindsight it was an incredible buying opportunity. The business was very strong and highly profitable and anyone who was psychologically strong enough to ignore the crowd and buy, did extremely well and hopefully hasn’t sold.
While Meta’s valuation is not quite as attractive today, I believe it is now an even better business. Let me explain.
Meta Platforms: A Social Media Jagganaunt
Meta, originally known as Facebook, was founded in 2004 by Mark Zuckerberg and his Harvard roommates, Eduardo Saverin, Andrew McCollum. It is the brand behind several major social media platforms, including Facebook, Instagram, and WhatsApp.
Meta has certainly made its mark on the world. Today, it attracts more than 3 billion active users per day (almost half the planet!) across its various platforms.
I believe Meta’s competitive advantage lies in its AI. While cloud providers like Microsoft Azure generate $13B in annual AI-related revenue, Meta's AI-powered ad product Advantage+ is already achieving a $20B run rate. This represents the crucial difference in Meta's approach: instead of building infrastructure for developers who must then find monetization paths, Meta directly enhances its core advertising business with AI.
The company continues to build on its capabilities, recently announcing two new powerful models:
Llama 4 Scout: $0.13 per million tokens with a 10 million token context window (industry's largest)
Llama 4 Maverick: $0.19-$0.49 per million tokens vs. ChatGPT4o at $4.38
Both outperform comparable models from competitors on key benchmarks
Coming soon: Llama Behemoth with 2 trillion parameters
The cost efficiency of these models (7-20x cheaper than GPT-4o) represents a significant competitive advantage for Meta.
The company also expects AI to further improve efficiency, with Zuckerberg noting that 2025 will likely see AI agents with "coding and problem-solving abilities of a good mid-level engineer."
Through the Value3 lens
From a Value3 standpoint, Meta presents a compelling case of a high-growth tech company with clear unit economics and a path to exponential value creation. Unlike many tech investments, Meta's AI initiatives are already generating measurable returns through enhanced ad pricing and efficiency.
The company has successfully navigated the transition from traditional social media to an AI-powered business model, maintaining strong margins while investing heavily in future growth. This represents exactly the kind of opportunity our Value3 framework helps identify—companies leveraging technology to create substantial economic value, even when traditional metrics might not fully capture their potential.
Applying the Value3 Powers
Applying the Value3 powers framework, Meta has network effects and scale economies that are a reinforcing combination. The business has scale economies on the infrastructure side, the GPU side, as well as advertising.
For certain users, switching costs are also high. Once a user establishes a large following, they are pretty much locked in. While there’s nothing stopping them from doing so, those running their business from social media are unlikely to switch to another platform and build their follower base from scratch.
Why now?
While most Magnificent 7 stocks are down significantly in 2025, Meta's has lifted nearly 10%. Its performance relative to the market reveals important distinctions that value investors should note. Unlike its peers, Meta has demonstrated clear AI monetization with tangible returns already flowing.
Recent developments
It's been an eventful month for Meta, with the social media giant releasing its Q1 earnings report and hosting its 2025 Inaugural Llama Conference
Meta’s blockbuster earnings report affirmed my thinking around the business. The company posted 16% year-over-year revenue to US$42.3 billion, and 37% EPS growth to US$6.43. Advertising impressions across the Group of Apps (Facebook, WhatsApp, Instagram) also lifted 5%, with the average price per ad increasing 10% year-over-year despite tariff and macroeconomic pressures.
User engagement remained strong across its social media platforms. Daily active users increased 6% to 3.43 billion dwarfing ChatGPT's 500 million users. Meta AI also now has nearly 1 billion monthly users, meanwhile Threads (launched in 2023), has now surpassed 350 million users.
Another closely matched metric was capital spending plans. Back in January, CEO Mark Zuckerberg flagged that the company would spend hundreds of billions of dollars in an effort to dominate the AI race. Management increased its full-year capital spending estimate to between US$64 billion and US$72 billion (previously between US$60 billion and US$65 billion), citing increased hardware costs and data centre investment.
On 29 April, Meta also hosted its Inaugural Llama Conference, which covered developments in artificial intelligence. According to prominent speakers at that conference, Meta's Llama models have been downloaded 1.2 billion times.
A final piece of advice for value investors
Value investors are instinctively attracted to businesses with share prices that are significantly down from their peak. They hope to take a contrarian view by buying them ‘on sale’, and profiting from a rebound.
Meta is certainly not one of those cases. Its share price is up nearly 10% for the year and 500%+ over the past 5 years. It may be psychologically difficult for value investors to buy Meta today, knowing they could have bought it in 2022 for significantly cheaper.
However, in the price to earnings ratio, ‘price’ is only half the equation. While Meta’s share price may be higher than 2022, its earning power is several times greater (and underappreciated by the market). In my view, this makes it an even better opportunity than it was back in 2022.
Another point to keep in mind is that, in 2022, there were plenty of other undervalued companies in the market. Investors were spoilt for choice; almost every high quality Value3 company is materially higher today. For example, Nvidia is up almost 900%, Arista Networks more than 200%, and Taiwan Semiconductor Manufacturing Company 150%. Even Value2 companies like Mastercard and Visa are nearly 100% higher.
Today, the market is significantly more expensive. Investors must therefore be much more selective to generate 15-20% annual returns over the next 5 years. I believe Meta fits the bill, offering compelling value in both absolute terms and relative to the market.
I find Meta a very exciting business, and hope that you’ll join me in following its journey.
- Mark Moreland
P.S. note: I am a shareholder and biased, but that doesn’t mean I’m wrong.
General Advice Disclaimer
Mark Moreland is a shareholder in the companies mentioned.
The information provided by Value3, operated by V3AUS Pty Ltd (trading as Value3, ABN 40 679 558 037), an Authorised Representative (No. 1310867) of BR Securities Australia Pty Ltd (ABN 92 168 734 530, AFSL 456663), is general in nature and does not take into account your personal financial situation, objectives, or needs. This information is intended to provide general advice only and should not be considered personal financial advice. Before making any financial or investment decisions, we strongly recommend that you consider whether the information is appropriate for your individual circumstances and seek independent advice from a qualified financial advisor or professional.
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