Should YOU BUY META Stock NOW? - META Stock Analysis
Duration
15:44
Captions
1
Language
EN
Published
Oct 10, 2025
Description
🏆 Join my EXCLUSIVE Community: https://bit.ly/WLWS 📈 Meta Deep Dive: Is META a smart buy after the 2Q25 beat and raised guidance? 👉 SUBSCRIBE for weekly market intel: https://www.youtube.com/@kenfreemancfa?sub_confirmation=1 💬 Live Q&A: Mondays @ 7pm ET - bring your questions! ──────────────────────────────────────────────────────── 🎯 What I’ll unpack: • The accounting tweak that changes optics - and how to adjust for it. • Advertising engine momentum vs. platform concentration risk. • AI capex surge: balancing runway, ROIC, and shareholder returns. • Wearables traction + WhatsApp/Threads monetization: real or hype? • My DCF fair value and a staged buy plan with risk checks. ──────────────────────────────────────────────────────── 👍 If data-driven breakdowns help your investing, smash LIKE and SHARE with someone tracking META. 🗣️ Comment: Are you using Instagram/WhatsApp more or less this year? ──────────────────────────────────────────────────────── 🔔 DISCLAIMER: Investing in the stock market involves risks. Please consult with a financial advisor to assess your individual needs and risk tolerance before making investment decisions. Ken Freeman’s insights are for educational purposes and should not be taken as definitive investment advice. ──────────────────────────────────────────────────────── Related stock valuation videos: Supermicro (SMCI) analysis → https://youtu.be/I6fSfb79mSE Microsoft (MSFT) analysis → https://youtu.be/pdH_ZVgYfnk ──────────────────────────────────────────────────────── #ai #MetaRayBanGlasses #fb #METAaiGlasses #META #MetaOakley #MarkZuckerberg #SellMETA #MetaQuest #MetaSmartGlasses #MetaLlama #METAstockDCF #METAstockIntrinsicValue #METAanalysis #METAdcf
Captions (1)
Today in under 20 minutes, I will
provide you what you need to know if you
want to invest in Meta. Trading near 718
per share, I currently have a buy rating
on Meta stock. But there are several key
factors that have a major impact on this
thesis that I will go deeper on. I will
give you the positives and negatives
from the 2Q25 results, a breakdown of
the three financial statements and my
Wall Street valuation model, what other
analysts on Wall Street say about Meta,
and my conclusion on Meta's future and
what you should do. So why should you
listen to me? My name is Ken Freeman.
I'm a CFA charter holder. I'm also a
professor of finance and economics. I
have 20 years of Wall Street experience.
And I'm the guy that investment banks
like JP Morgan and asset managers like
Black Rockck hire to train their
financial analysts on Wall Street. In my
research, I discovered seven things that
got me very excited and six red flags to
watch out for with Meta. Meta
significantly beat Wall Street estimates
on revenues and EPS and they raised
guidance. If you're enjoying this,
please smash that like button.
Any news? Let's cover the red flags
first. The virtual reality black hole
continues. This limits cash for buybacks
and dividends.
The company has invested 65 billion
dollars or so in its reality labs
division since changing its name to Meta
in 2021. And it is unclear how fast the
audience will grow for this totally new
form factor. And it is technically
challenging. A couple of live demos
failed last night when the glasses
didn't respond. Zuckerberg blamed the
Wi-Fi. big cash outlay today for servers
and data centers to help keep up with
the AI arms race. The payoff is
uncertain, but it seems like they don't
have a choice.
Capex is going higher. Uh there's no way
to put it. We're at the beginning the
cycle. We've said this that the
enterprise adoption of AI is tiny. Your
company, my company, we're we're in our
infancy. There's just a few people using
these tools today. We're all using it in
our personal life, but we're not using
it in work. And that's only going to
grow. And that's going to fuel the next
leg of this over the next couple years.
Earnings look better because of a useful
life change, not operations. This
benefit makes future year-over-year
comparisons tougher.
In terms of the specific line items,
cost of revenue increased 16% driven
mostly by higher infrastructure costs
and payments to partners, partially
offset by a benefit from the previously
announced extension of several useful
lives.
Meta still gets almost all of its money
from advertising. If ad budgets tighten,
there's no backup revenue stream. Europe
is a big ad market. Policy changes can
bite fast. This adds uncertainty to
guidance and planning.
This could have a significant negative
impact on our European revenue as early
as later this quarter. We have appealed
the European Commission's DMA decision,
but any modifications to our model may
be imposed during the appeal process. a
$2 billion acquisition of Revos, which
builds processors for AI data centers. A
14.3 billion investment for 49% of scale
AI, which will help train cuttingedge AI
models. Acquisitions are simple on the
front end, but they're complex on the
back end. Execution is critical.
Meta is paying nearly $15 billion for a
scale AI stake. I've confirmed with a
source familiar with the deal. The
information first reported this new
number. A previous report had pegged it
to about $10 billion. So, this
approaches Meta's largest investment
ever.
Here's what got me really excited.
Meta's core platforms, Facebook,
Instagram, and WhatsApp, are still
growing, even with a large base. More
users means more ad impressions and data
for targeting.
Meta's ability to continue to grow users
and to grow ad revenue is what's driving
it. But it's also what's in the future.
The ability to bring Instagram, the
social networks, the monetization models
of digital ads, and of course, what they
want to do in the ARVR piece is all
headed in the next 12 months. And that's
where the excitement is because not just
the glasses, but it's also the new
automation and AI. Meta is the most
efficient company in the valley from an
automation perspective. They're going to
be so efficient that they're going to be
able to afford their super intelligence
employees and of course the investments
in AI that they're making.
Meta's core ad engine is performing on
both volume and pricing. Volume and
price growth creates a compound effect
on revenue growth. In Q2, the total
number of ad impressions served across
our services increased 11% with growth
mainly driven by Asia-Pacific.
Impression growth accelerated across all
regions due primarily to engagement
tailwinds on both Facebook and Instagram
and to a lesser extent ad load
optimizations on Facebook. The average
price per ad increased 9% benefiting
from increased advertiser demand largely
driven by improved ad performance.
Revenue expanded double digits in every
geography, not just the US. That
diversification protects against
regional slowdowns.
On a user geography basis, ad revenue
growth was strongest in Europe and rest
of world at 24% and 23% respectively.
North America and Asia-Pacific grew 21%
and 18%.
Metastill throws off massive cash
despite huge AI and capex outlays. Free
cash flow is the lifeblood of a growing
business funding R&D and long-term
growth. Huge liquidity provides safety
and flexibility for scale investments.
This gives Meta room to outspend
competitors in AI.
The core businesses and the balance
sheets are supporting these massive
investments.
Large demand this early signals that
wearables could become a real consumer
business, not just research and
development. Strong sell-through can
attract developers and partners to the
platform. Yeah, Meta Shar is rising this
morning, up about 1% now after the
company showcased its new hardware and
the star product were these Meta Rayband
displays that I got to demo last night
with an inland lens display and a neural
wristband which allows users to pull up
messages, take and watch videos, get
directions, and ask questions of meta AI
as well as get the answers or recipes.
All of that within the glasses. You see
it within the lens. Now, these Ray-B
band displays along with upgraded Ray-B
band Meta glasses and Oakley Vanguards
are Meta's most ambitious bet yet on
hardware.
This is what everyone is missing. Meta's
nextgen platforms, WhatsApp and Threads
are finally starting to earn. This adds
new revenue layers beyond Facebook and
Instagram.
Meta is in every check is blowing away
advertiser budgets, taking share from
Google, taking share from Amazon. And
so, you know, the kind of to his
research and what we find uh I think
there's an element too of like what's
happening uh in in the public cloud.
When it comes to any stock, I let the
numbers tell the story and that involves
looking at the company's financial
statements. Would you buy a house
without knowing the size, location,
dimensions, or condition?
No thanks.
That is exactly what you're doing when
you buy a stock without understanding
the three financial statements. If you
want to see how I train the world's top
financial analysts on Wall Street, check
out my school community. Win like Wall
Street. Just scan the QR code on the
screen. The balance sheet shows us how
the business is funded. If assets grow
faster than liabilities, equity
increases and we win. At year end, Meta
had almost 44 billion of cash. And if we
add marketable securities, it's almost
78 billion. Cash in short-term
investments. At the end of 2Q was 47
billion. And Meta was net cash, which
means cash is greater than debt by
over$18 billion. This gives the company
a ton of money to invest in the future.
Whether it is AI, the metaverse, or
share purchases. In early 2024, PP&E was
growing in the high teens. And now with
massive AI investment, it's growing over
40% year-over-year. Meta has massive
capex plan with their commitment to AI
infrastructure buildout. While the
company paid its first ever dividend in
2024, retain earnings increased by
almost 25% to over 102 billion.
Year-over-year growth in 2025 is above
31%, which is incredible. The fact that
the company can pay over five billion in
dividends while still growing retained
earnings is impressive. So, what's the
takeaway? Meta has tons of cash, its
debt is under control, and it is
returning billions of dollars to
shareholders despite investing tens of
billions into AI. This is truly
impressive for shareholders. The income
statement shows us if the company is
generating profits. We want to see
revenues grow faster than expenses,
which will grow profits. The way we
determine how effective a company is at
generating profit is via margin.
Revenues minus expenses equals income,
income over revenues equals margin. If a
company has higher revenues and lower
expenses, it will have higher margins.
If revenues grow faster than expenses,
margins will get big or expand, which is
what we want to see. Last year, Meta
generated a massive 164.5 billion in
revenue with nearly 98% coming from
advertising. Revenue growth was almost
22%, the highest level in 3 years.
Year-over-year revenue growth was above
20% in four of the last six quarters. So
the momentum is not slowing down. Over
the last six quarters, margins have
continued to expand across the board
from gross down to net. This is due to
the tremendous cost discipline that Meta
has been showing. After a rough 2022,
Meta reached margin levels in 2024 that
it has not experienced in 6 years due to
layoffs and aggressive cost cutting.
Meta achieved net income of 62.4 billion
in 2024, more than the last 2 years
combined. and net income year-over-year
growth has averaged nearly 40% over the
last four quarters, showing that the
costs have remained low as revenue
continues to grow. Because the company
has aggressively cut costs, more money
flows to the bottom line, which is great
for investors. So, what's the takeaway?
High revenue growth combined with cost
cutting means expanding margins and
increasing profits for investors. The
cash flow statement tells us where the
cash is generated by the company and
there are three buckets. operating,
which is the cash the company generates
internally. Investing, which is the cash
demanded for long-term growth,
financing, which is the cash the company
generates externally. When we add these
together, we get the net change in cash.
We want to see companies generating
cash, making this positive, not losing
cash, which would make this negative.
Operating cash flow is positive and
growing rapidly. The operating cash flow
is primarily driven by the strong net
income that Meta is generating. While we
see the increase in capex to fund
metaverse investments and AI
initiatives, there is something amazing
going on here. Marketable securities
generated 15.8 billion in 2024, a more
than 2.5x increase from 2023. And in the
first 6 months of 2025, Meta has
generated over 19 billion. Meta is
generating billions from the more than
35 billion of cash that it has invested
in marketable securities. Financing cash
flow is negative, but it is not
primarily due to paying down debt. What
is fascinating is that the bulk of the
outflow is due to the massive amount of
cash being returned to shareholders. 35
billion was returned to shareholders via
dividends and share repurchases. That
trend has continued with 25.6 billion
returned to shareholders in the first 6
months of 2025. So, what's the takeaway?
With over 47 billion in cash and
short-term investments, Meta is using
those assets to generate income, which
it's returning to shareholders and
reinvesting in its business for the long
term. So, what do I think about Meta and
what should you do? I'll get into that,
but first, let's go through my valuation
on Wall Street. We build a discounted
cash flow model to measure the intrinsic
value of companies. Because companies
generate cash flow and we projected the
three financial statements, we could
take these future cash flows, discount
them back to today to get a current
intrinsic value for the company. We
cannot do this type of valuation with
crypto, baseball cards or art because
they have no cash flows. As you can see
on the left, we take specific line items
that we projected from the three
financial statements. We use these line
items to calculate free cash flow to the
firm or FCFF. To this we add a terminal
value which is the value from the end of
the model out to infinity because the
company does not stop operating when our
model ends in five years. We discount
these cash flows back to today to get to
total enterprise value. To get to equity
value, we strip out the debt. We add the
cash. We strip out non-controlling
interest. We add associate investments.
We get an intrinsic equity value of
almost $2.2 trillion. We divide by the
current shares outstanding. We get an
implied share price of about $874
compared to the recent close of almost
718. That is a 21.8% 8% discount, which
is a buy rating. On Wall Street, if a
stock is trading at greater than 20%
discount, it's considered a buy because
it provides us a margin of safety. I'll
give you my thoughts on how to play Meta
Stock later in the video. So, what does
Wall Street have to say about Meta?
Let's cover that next. Wall Street is
generally positive on Meta and sees the
company making strides in AI on the
advertising front and with wearables.
Truist reaffirmed a buy rating with a
price target of 880. Truis was
incrementally positive after connect as
AI wearables and hardware expand the
emerging AI enabled ecosystem. Citizens
reaffirmed a buy rating with a price
target of 900 citing traction in Meta's
AIdriven creative and ad tools including
video generation AI business assistant
and scaling messaging ads as a $10
billion line item. Mizuho has a buy
rating with a price target of 925 and
they named Meta a top long-term internet
pick. Mizuo sees Meta as the best to
leverage AI, machine learning, and Gen
AI across product engagement, ad stack,
and operations. Cap IQ gives me a sense
of how other analysts on Wall Street
view the company. 62 analysts cover Meta
on Wall Street. The ranges from a low of
658 which is an 8% decrease to a high of
a,086 which is a 51% increase. The
median is 87750 which is a 22% increase.
The overall rating on a scale of 1 to5
is 1.41 which is a buy rating.
You should seek the advice of investment
professional always. I do not know your
individual financial situation. This
content is meant to educate and is not
investment advice.
That being said, I do have a position in
Meta. It is currently a 4.5% wheat in my
overall portfolio and I was able to buy
shares for under 500 in midappril during
the tariff craziness. If you decide to
buy Meta, I'll tell you exactly how to
build a position which I'll reveal
shortly. Using data from AI chats to
personalize ads can increase impulse
buying. This provides a potential boost
beyond traditional scrolling and
clicking and could be a real gamecher.
Big Llama distribution partners signals
faster adoption by developers and
enterprises. Revenue share opportunities
with hosts hints at real business model
potential. Premium entertainment in
headset equals broader use cases beyond
gaming. Brandame partners validate the
platform and boost time spent using the
product. Meta had an all-time high of
79625 in mid August and it's down almost
10% since then. My model shows a value
of 874 which is a 21.8% 8% discount at
current levels. On Wall Street, we buy
with a margin of safety of at least 20%.
So, Meta is a buy at current levels, but
if you're interested in buying Meta, I
would be looking to buy below 728 in the
700 to 725 range. If you decide to add
it to your portfolio, this is what you
should do. Decide how much capital you
want to allocate to the position. I
typically choose 10% as my max, but
start small and build over time. Utilize
limit buy orders so that you're not
chasing the stock. Break your purchases
into pieces so that you dollar cost
average into the position. Meta is the
only diversified pureplay social media
company out there and their integration
of AI into advertising is already
bearing fruit. While the metaverse is a
few years off, Meta is leveraging the
success in advertising to fund the
future of AI. If you like this and want
to see another in-depth stock valuation,
check out my Super Micro video here or
my Microsoft video here. And if you
found this valuable, please share this
with someone who you think would enjoy
this. As always, be relentless.