META STOCK ANALYSIS - Why It'll Double! $3 Trillion Soon?

Added: 2026-05-11

[00:00:00]Hello friends, Victor here. In today's video, I'm going to analyze Meta Stock again and review Meta's latest earnings.

[00:00:09]Specifically, I will explain why I believe Meta stock is still deeply undervalued. Why I believe the market is misunderstanding Meta and why I believe Meta stock will eventually double to over three trillion in market value over the next few years.

[00:00:27]Just to give you more context, at the time of making this video, both the S&P function and the NASDAQ 100 are near another all-time high.

[00:00:36]However, Meta has been underperforming the S&P 500 and the NASDAQ 100 in recent months, mainly because investors are concerned that the company is overspending on AI infrastructure to support its internal AI workloads and to build frontier AI models like the recent MU Spark without earning enough ROI from those investments at least not yet.

[00:01:01]Another concerns that Meta's capex has been growing much faster than its revenue growth and cash flow growth in recent quarters. That means Meta's free cash flow will likely decline further in the coming quarters. On the other hand, Meta's advertising business has been growing much faster in recent quarters because of its AI investments and significantly improved AI recommendation systems and ad delivery systems which are driving higher user engagement, better content recommendations for users and higher ROI for advertisers.

[00:01:36]Yet, the market is still selling off meta even though its strong business fundamentals have not changed at all.

[00:01:44]So, in this video, I'm going to explain why I believe Meta is still deeply under value and why I believe Meta will eventually double to over 3 trillion in market value over the next few years. If you like this video and want to support our channel, make sure to check out my Patreon blog in the video description below. Our goal is to help our members become multi-millionaires through intelligent discipline investing. Once you become a premium member, you get full access to my intelligent investor discord community where I share my latest stock trades, portfolio rebalancing updates, best stock ideas, and the reasoning behind them. In addition, you'll get full access to my latest intr models and stock ratings for all the stocks I'm following, so you can see when a stock becomes underw.

[00:02:35]The Patreon link is in the video description below. Make sure to check it out.

[00:02:40]Before I start, let me show you one of my investment accounts. I like to use this account to show you my investing strategies over time. This account has performed exceptionally well since I started it about five years ago. For example, this account's trailing 12 month return was nearly 200%. While the S&P 500 grew about 31% during the same period, this account has significantly outperformed the S&P 500 since inception mainly because I try to invest in the best AI semiconductor companies and the best tech companies that are leaders in their industries and that generate the most profits. For example, in this account, I have invested in TSMC, Google, Nvidia, Micron, Broadcom, Apple, Meta, Microsoft, and even the DRM ETF. I bought most of them when they were much more underwhel. I don't trade stocks.

[00:03:35]Instead, my main strategy is to keep buying and holding the best tech and the best AS semiconductor businesses for the long term so they can continue compounding over time. However, Meta has been underperforming the S&P 500 and the NASDAQ 100 in recent months, mainly because the company plans to increase its capex much more than expected in the coming quarters. So, here's the bare case for Meta. The biggest risk is that Meta is planning to increase the company's capex to between 125 billion and 145 billion this year up from the previous guidance of 115 billion to 135 billion. Moreover, Meta's capex will likely increase even more over the next few years because the company needs significantly more compute capacity and AI data centers to support its core advertising business. its internal air warloads and Meta's super intelligence labs or MSL.

[00:04:36]That means Meta's margins and free cash flow will likely face more pressure going forward. The most important question is this, when will Meta start earning meaningful ROI from its AI investments? I'll talk more about this later on in this video. The second biggest concern is that Meta's reality labs business or what I call the metaverse business is still losing billions of dollars every quarter. For example, in the most recent quarter, Meta lost about $4 billion from its Reality Labs business alone. I believe Meta's Reality Labs business will continue losing billions of dollars every year, mainly because Mark Zuckerber wants Meta to continue building mixed reality headsets and AI glasses that could eventually replace the iPhone. But in reality, it will be extremely difficult to replace the iPhone because it's already the most popular smartphone in the world and billions of users are already deeply integrated into Apple's iOS ecosystem.

[00:05:36]Meta would need to create AI glasses that are significantly better than the iPhone for consumers to fully replace their smartphones and use AI glasses instead. Right now, I don't think that's realistic at all. Now, let me show you Meta's recent financials and management's outlook so you'll know what to expect going forward. First, I will give Meta's latest earnings and overall rating of A. The only reason I'm not giving Meta an A+ rating is because the company is planning to increase its capex much more than expected in the coming quarters.

[00:06:12]Meta still needs significantly more compute capacity and AI infrastructure to support its AI workloads. AI research and development and its core advertising business.

[00:06:24]In the most recent quarter, Meta's revenue grew 33% year-over-year. This is outstanding considering that Meta's quality revenue is already over 56 billion.

[00:06:36]Meta's operating income grew 30% year-over-year while EPS grew 62% year-over-year. Both financials are excellent. Even though Meta is investing heavily in AI infrastructure and building its super intelligence labs, the company still maintain an operating margin of 41% in the recent quarter. I think this outstanding more meta's daily active users reached 3.56 billion up about 4% year-over-year.

[00:07:07]Ad impressions increased 19% year-over-year, while the average price per ad increased 12% year-over-year.

[00:07:15]All of these financial metrics show that Meta's user engagement, content recommendation systems, and ad targeting systems are improving and driving higher ROI for advertisers.

[00:07:28]In terms of outlook, Meta still expects its operating income this year to be higher than last year's operating income. This suggests that Meta will likely maintain high margins and strong double digit revenue growth rates this year even though the company plans to spend significantly more money on AI infrastructure, AI workloads and frontier AI models. However, as I mentioned earlier, the biggest issue is that Meta is planning to increase its capex to between 125 billion and 145 billion this year, up from the previous guidance range. Specifically, this increase in capex is mainly coming from higher component costs, such as much higher memory prices and additional data centers that are needed to support the company's future compute capacity needs.

[00:08:19]But here's the most important part you should know. Just like Amazon, Google, Microsoft, and Oracle, Meta will likely continue growing its capex at double digit rates over the next several years because the company is still computed.

[00:08:35]Meta will need significantly more air data centers and compute capacity to support its own internal air workloads, frontier air research, and of course, its core advertising business.

[00:08:47]At the same time, Meta will need to scale its compute capacity much more to remain competitive in the social media, advertising, and AI markets. For example, according to estimates from Morgan Stani, total capex spending from the US hyperscalers is expected to exceed 800 billion in 2026 and surpass 1 trillion by 2027.

[00:09:14]As for Meta, the company's capex is expected to reach about 135 billion in 2026 and approximately 165 billion by 2027.

[00:09:25]The important question is this. What will happen if Meta eventually realizes that it has been overspending on capex and air infrastructure?

[00:09:36]Meta will have several options. First, if Meta overspends on capex, the company can always slow down its capex and as spending later on, which will significantly improve Meta's free cash flow growth and margins.

[00:09:51]Second, Meta can always use additional compute capacity to further support its core advertising and social media business, which will increase user engagement, daily active users, and advertising revenue over time. For example, Meta can continue using more compute capacity to improve its AI recommendation systems, AI ad targeting systems, AI tools for advertisers and content creators and of course its social media platforms including Facebook, Instagram, WhatsApp, Messenger, and threats.

[00:10:26]Third, Meta could potentially rent out its excess compute capacity such as its Nvidia AI systems and AMD AI systems to external customers, which will allow Meta to earn cloud revenues similar to Google, Amazon, Microsoft, and Oracle.

[00:10:44]This is why I'm not worried about Meta overspending on capex and AI infrastructure, even though it will likely impact Meta's margins and free cash growth in the short term.

[00:10:56]Also, if you look at Meta's balance sheet, you will notice that Meta's total depth has been increasing much faster than its cash balance in recent quarters. At the time of making this video, Meta has about 81 billion in cash and shorter investments compared to nearly 87 billion in total depth. This means Meta has approximately 6 billion in net depth. Meta step to equity ratio is only around 0.36.

[00:11:25]Depth to IIDA is only around 0.76 and depth to free cash flow is still less than two. This depth level is still very small compared to most SMB function companies. Moreover, Meta still generates over 40 billion in free cash flow each year. If Meta realizes that it has been borrowing too much and overspending on capex, the company can always slow down its capex spending and use its 40 billion plus in annual free castle to pay down its total debt. This is why I'm not worried about Meta over spending on capex and AI infrastructure.

[00:12:04]Now, let's think about this. Mark Zuckerberg wants to create personal super intelligence for billions of users around the world. If he succeeds, Meta's massive AI capex investments will earn huge returns for the company over the long term. Also, Meta has consistently follow this growth strategy does work well for many years. Build great products first, scale to billions of users and then monetize them later on.

[00:12:33]Mark Sucker recently said this should earn this call.

[00:12:37]>> Uh thanks for taking my question. Mark, I wanted to ask you just about the uh the level of investment you're making and sort of the the signposts you're watching to ensure you're going to generate ROIC on all these investments behind Muse and and and the other products. So if you could just sort of let us know some of the key factors you're watching over the next 12 to 24 months whether it's meta muse advances core algorithm what are you sort of watching for most just to make sure that you're on the right path to generating healthy ROIC on all this capex and infrastructure spend >> that's a very technical question for you know basically we're the things that we're watching are to make sure that we're on track building leading models and leading products The formula for our company has always been build experiences that can get to billions of people and focus on monetizing them once you get to scale. I I think that that's we're seeing a little bit of that here where basically we invest in advance to build leading models then we convert that into um into leading products and then we think that these are going to be some of the most important products that that um that that get built over the next decade. So I I think just like anything else that we've done over time the basic milestones that I look at are around first technically are we delivering the quality to enable a great product then second when you have the product how is it scaling and then third you look at the monetization and then you drive up the efficiency of it towards increasing profitability.

[00:14:16]I don't think we have a you know a very uh precise plan for exactly how um each product is going to scale month over month or or anything like that. But I think we have a sense of the shape of where these things need to be and um and and I think if you look at the usage of these and the quality of the products and the quality of the models that are out there and uh the use that other frontier models are getting and the trajectory of that I'm quite comfortable that a the lab that we're building is on track to be a leading lab in the world. I think Muse Spark is a very high quality model.

[00:14:58]It powers Meta AI, which I think is now a world-class assistant. We have an ability to be able to grow that uh and and and have a large amount of engagement. And over the the coming quarters, we're just going to be tracking how do our next set of um training runs go um how do our products scale, how excited are we about the products in the pipeline where right now we're very excited. And then we'll also ramp up monetization over that period of time as well. So I think that those are the set of things that I look at. Now, let's talk about Meta's long-term growth prospects. I'm going to explain why I believe Meta will eventually recover and double to over 3 trillion in market value over the next few years. Here's why. First, if you look at this consensus forecast, you can see that Meta's value is expected to grow by around 26% this year, 19% in 2027, and 17% in 2028.

[00:15:52]Similarly, Meta's EPS is expected to grow by around 39% this year, 7% in 2097, and 15% in 2028.

[00:16:03]That means Meta's average revenue and EPS growth rates are expected to be around 19% to 20% annually over the next few years. I think these growth rates are still outstanding considering that Meta is already one of the largest companies in the world.

[00:16:21]Second, I believe Meta is oversold and undervalued right now. If we compare Meta's 4P multiples to it expected growth rates over the next three years, for example, at the time of making this video, Meta's 4P is expected to decrease to around 19 this year, 18 by 2007, and only around 15 by 2028.

[00:16:44]These 4P multiples are far too low compared to Meta's expected double-digit growth rates over the next several years.

[00:16:53]Third, contrary to what the market believes, Meta is already earning real revenue and real ROI from its AI investments and large capbacks.

[00:17:03]Meta is not a cloud service provider like Google, Amazon, and Microsoft.

[00:17:09]These hyperscalers already generating large amounts of AI revenue from their cloud services. For example, Google, Amazon, and Microsoft can earn AI value by renting out their compute capacity to third party customers, hosting AI models for customers to use, serving children of AI tokens every day, providing AI training and inferencing services, and even selling their AI chips and AI systems to customers.

[00:17:39]On the other hand, Meta earns real ROI and revenue from its AI investments, many from its core advertising business.

[00:17:47]Meta has been using AI to improve its recommendation systems, ad targeting systems, content recommendations, and AI tools for content creators and advertisers. This is why Meta's advertising revenue growth has accelerated much more in recent quarters. But the market still doesn't fully understand that meta may earth air ROI through its internal workloads which improve its core social media and advertising business.

[00:18:17]Let me give you a few more examples.

[00:18:19]Meta is developing nextg recommendation systems that will use LOMS to achieve a deeper first principles understanding of content and user interests moving beyond traditional engagement patterns.

[00:18:35]These new LM based recommendation systems will improve content recommendations, user engagement and advertising performance over time. As for advertisers, Meta's newer AI recommendation engines and ad targeting systems have already improved inference ROI and higher ad conversion rates.

[00:18:56]According to Google Gemini, the acceleration in Meta's advertising value is primary attributed to improvements in ad delivery and pricing power enabled by AI.

[00:19:08]Ad impressions deliver across the family of apps increased 19% year-over-year while the average price per ad rose 12%.

[00:19:18]This combination of volume growth and pricing strength indicates that Meta's AIdriven recommendation systems are effectively matching advertisers with highly engaged users, thereby increasing the value of each impression.

[00:19:35]In other words, Meta's large AI investments over the years have helped the company generate significantly higher advertising value by improving user engagement, content recommendations, and add conversions.

[00:19:50]This is why you can see Meta's average revenue per user has been steadily increasing almost every quarter.

[00:19:58]I believe this trend will continue for many years because Meta will continue expanding its compute capacity, developing better air models, building more advanced air recommendation systems and ad targeting systems, and creating much better air tools for content creators and advertisers.

[00:20:17]To maintain strong double digit advertising value growth, Meta will continue delivering more relevant and personalized ads to users across Facebook, Instagram, WhatsApp, Messenger, threats, and eventually Meta AI. Moreover, I believe Meta's average price per ad will continue increasing over time because there's still very strong demand for meta ads. Advertisers are willing to pay higher prices for meta ads because they continue earning higher ROI on their ad spending and because they can directly reach their target customers through Facebook, Instagram, Messenger, and WhatsApp.

[00:21:00]Since Meta already has the largest daily active user base in the world at over 3.5 billion users, and this lumber continues to grow almost every quarter, it makes sense for most advertisers to continue allocating more of their advertising budgets to Meta's advertising platform.

[00:21:18]Here's another major growth catalyst that will likely benefit Meta a lot going forward. According to estimates from Gomeax, consumer and enterprise AI agents are expected to increase token consumption by roughly 24 times by 2030 compared to current token consumption.

[00:21:39]In other words, AI agents for consumers and enterprise customers are expected to grow exponentially over the next five years. I believe this will translate to huge revenue growth for air companies that can build the best air agents at the lowest cost possible.

[00:21:58]As I mentioned earlier, Meta's long-term goal is to bring personal super intelligence to billions of users around the world. If Meta succeeds in bringing AI agents to billions of users, the company will eventually monetize its AI agents and AI tools such as Meta AI.

[00:22:17]These additional air revenues will be added on top of Meta's already massive advertising revenues.

[00:22:25]Here's one example that suggests Meta is moving in the right direction to our bringing personal AI agents to billions of users around the world.

[00:22:35]A few weeks before I started making this video, Meta released its Muse Spark Frontier AI model that could compete with Anthropic, Google, OpenAI, and XAS Frontier A models.

[00:22:48]Meta's MUS Spark AI model is just the beginning. Meta is planning to release much more advanced Frontier A models for both consumers and businesses in the coming months.

[00:22:59]Now, let's talk about Meta Stock version. I always use this fair war tool from rankingstock.com to find out whether a stock is likely undervalued, fairly valued or overvalued.

[00:23:11]If you want to access this tool, you can check it out at rkingstock.com.

[00:23:16]We have a 7-day free trial.

[00:23:19]Here's how this fair version to works.

[00:23:21]The orange line is Meta's fair value over time. The blue line is the stop price and the dotted lines are the price targets. Right now, Meta's estimated fair value is still significantly higher at around $740 per share, while Meta's price targets are also much higher than the current stock price. For example, at the time of making this video, our short-term price target for Meta is around $660 per share, while NS average price target is around $821 per share.

[00:23:55]This suggested meta is still deeply undervalued. Now I also calculated metas in value while using this W model here.

[00:24:04]If you like to access this model, you can download it from my Patreon blog.

[00:24:08]The link is in the video description below.

[00:24:11]Since this video is already getting long, I'll summarize the results here.

[00:24:15]Based on my calculations, Meta's interest value is around $75 per share.

[00:24:21]For comparison, Morning Star estimates Meta's fair value around $850 per share, while our investing software estimates it around $740 per share. This means Meta's average fair value is around $765 per share. This suggest that Meta is still deeply under worrying now.

[00:24:42]So, is Meta a buy, hold, or sell?

[00:24:45]Personally, I believe Meta is either a buy or hold because I believe it will eventually recover and double to over three trillion in market value.

[00:24:56]The stock is oversold and deeply undervalued mainly because the market believes that Meta is overspending on capex and not earning enough ROI from its AI investments. I believe the market is wrong because Meta's most important advertising business has grown significantly over the years since Meta started investing in AI to improve its content recommendation systems and ad targeting systems.

[00:25:22]Meta earns AI value by improving its core advertising and social media business. Here's the bare case. If Meta realizes that it has been overspending on capex and AI infrastructure, it can always slow down its AI spending later on, which will improve the company's free cash flow growth and margins.

[00:25:43]This is why I'm not worried about Meta overspending on a infrastructure.

[00:25:48]Here's the b case. If Meta succeeds in building personal super intelligence for billions of users around the world, Meta could earn substantial revenue from air agents that will be added on top of its advertising value.

[00:26:03]Now, everything I've shared here is just my opinion and my analysis based on my own research. There are not functional wise. There are always risk with investing. So, it's very important to invest in what you truly understand and avoid speculation. Always do your own research and extra due diligence first before making any investment decisions.

[00:26:23]Thank you for watching and supporting our channel. This Victor from the intelligent vious channel and I will see you in the next video.