Meta Platforms — GAFAM—Investing

Is Meta Platforms a Value Play or a Value Trap ?

Times are tough for the stock behind Facebook, WhatsApp and Instagram. Should you consider it as a value investment opportunity, or another value trap to flee? Here is what I think.



Photo by Dima Solomin on Unsplash

The Fall of a Giant

Who doesn’t know Meta? Or at least its products, most famous being Facebook, but also Instagram, WhatsApp or Meta VR Headsets (formerly Oculus)? Nearly everyone recognizes the Facebook logo, more and more people use its various platforms, all of that being a powerful signal about the power, dominance and competitive forces behind Meta Platforms.

Unfortunately, the same cannot be said of the META stock, which is currently down nearly 70% from its all-time highs.

META stock performance since September 2021
META stock performance since September 2021
META market capitalization since 2015. Capitalization is currently around levels of 2015–2016
META market capitalization since 2015. Capitalization is currently down around 2016 levels

At the beginning of November, market capitalization felt to 2015 levels. Does it mean that the company financials are broken? Not at all, as you will see below.

Diving into Meta’s numbers

Indeed, a market cap returned 7 years back isn’t justified, even if we set aside the explosion in GAFAM prices these past few years, due to favorable economic and monetary conditions. These were the good days, right?

Meta total revenues, net income and FCF per share (all FY), between 2014 and 2022
Meta total revenues, net income and FCF per share (all FY), from 2014 to 2022. Does it look like to decrease ? Spoiler: no.

Seriously: between 2015 and now, annual revenues have increased almost tenfold. And so did net income, from 4 to nearly 40 billion dollars over the same period. Free cash flow is skyrocketing, company spent about $45 billion in buying back million shares… Pretty impressive, right? And even if profits decline for some reason, Meta can still rely on its balance sheet for repurchases, dipping into its 48 billion total cash and short-term investments.

Basically, all the news around Meta is really negative, and so is the crowd’s mindset. Markets are overreacting (come on: $80 billion wiped from value on a single day, on October 27, 2022). As Howard Marks said in one of his Oaktree Capital memo :

If the extreme highs and lows are excessive and the result of the concerted, mistaken actions of most investors, then it’s essential to leave the crowd and be a contrarian.

I don’t say there is nothing to worry about. Meta is heavily investing, among others on the metaverse topic which crystallizes the attention, thanks to Mark Zuckerberg’s intent to stick to the metaverse and virtual reality. All the debate is focused on that point, but Meta is also investing and researching on more useful things such as AI to improve its services and remain competitive against opponents (especially TikTok). Nothing fancy here for a growth company : these expenses are needed, useful and for tangible goals.

Photo by Alexander Grey on Unsplash

But again, the metaverse penalizes all the storytelling around the stock. If Mark Zuckerberg accepts to change his tune and to spend less on the metaverse, Meta should be able to properly reallocate all or part of its cash flows. Maybe not a bad idea regarding macroeconomic difficulties ahead. I’m pretty convinced that then, the negative narrative around the stock would change drastically. Would it be enough to erase the excess? Maybe!

Anyway, Mark Zuckerberg already started to change his speech early November, by addressing a message to Meta Employees. Within, some words caught my attention: “I made the decision to significantly increase our investments […] I got this wrong, and I take responsibility for that.”.

Final words

That’s why I bought some additional shares of Meta Platforms at the end of October, the day the stock plunged more than 20%. As explained above, in my opinion, this drop is not intrinsically justified. However, the advantage of the plunge is that the stock is now trading at fairly cheap ratios.

P/E, P/S, P/FCF & P/B ratios of Meta on December 4th, 2022

I strongly believe that Mark Zuckerberg does not have a sense of reality regarding his metaverse bet, and that his cash allocation and his cost control are catastrophic in times of tough economic conditions. But beyond all that, Meta’s financials remain good. On one hand, moving from healthy to catastrophic financial situation seems unlikely. CEO strategy, on the other hand, can change. It is already happening.

Photo by on Unsplash

Then, in my opinion, Meta is an opportunity to play a contrarian bet on a large, American tech company with a flavor of moat investing, regarding Meta’s competitive advantages! It’s then a value play for me.

I’m Raphaël, founder and editor-in-chief of, a financial website for French-speaking private investors. Thanks for reading! Don’t hesitate to follow me on Medium, Twitter or Polywork.

This article is for educational and entertainment purposes only and shouldn’t be considered as financial or legal advice. Not all information will be accurate, but all the data is sourced. Consult a professional before making any significant financial decisions. This article shouldn’t be seen as an incentive to buy or sell any of the securities mentioned therein, nor endorsement to any presented strategy.




Blogger at (investing for french investors). I talk about investing, financials & money with a long term mindset.