Summary
- Meta Platforms is upgraded from Hold to Buy as the recent 26% price drop provides a margin of safety despite elevated CapEx risks.
- META’s core advertising business, now 98% of revenue, continues to deliver robust growth with AI-driven improvements in ad pricing and efficiency.
- AI investments are already yielding tangible returns, with a 22% increase in ROAS and improved ad metrics, supporting mid-teens FCF growth expectations.
- Litigation related to youth safety poses a significant long-term risk, but current valuation only requires META to compound FCF at 15.7% annually for a decade.
Thesis
I previously wrote about Meta Platforms, Inc. (META) and initiated a Hold rating last September when the stock was trading around $742 per share. After the tech company announced a large increase in CapEx spending, I thought the share price
