What is Meta stock worth? A Meta intrinsic value analysis

Meta Platforms Inc. (META)
NASDAQ
45
3
0
SA
Sheldon Adam
SEP 12, 2023

Past Growth

Here's a look at Meta's revenue and income YoY growth rates since 2014

It’s clear that revenue growth rates have been slowly decreasing - from about 60% in 2014 to 37% in 2021.

Future Growth

So are Meta going to keep this high growth rate in the future? Let's start by looking at a breakdown of Meta's revenue sources:

The overwhelming revenue comes from its "Family of apps" which includes Instagram, Whatsapp, and Facebook. The Reality Labs segment is revenue from the Metaverse which only makes up a tiny percent of the total revenue.

As a Meta investor you’re essentially hoping for the  "Family of apps" segment to keep growing at a decent rate because the Metaverse segment makes up such a small part of the revenue that it likely won't have an effect on the overall company revenue for many years to come.

So let’s dig deeper and see how much room Meta has to grow this Family of apps segment. Here’s a look at the number of daily active users on all of their family of apps combined:

2.96 billion is just under half the world's population. Essentially Meta can only double their number of users before they hit the roof!

Ok so maybe they don’t have that much room to grow in terms of users, but perhaps they can grow their revenue per user? Well let's take a look at this chart from their 2022 annual report

Over the past 2 years the annual revenue per person (ARPP) grew by just 1 cent from $8.62 to $8.63.

With this info in mind I wouldn’t be too optimistic on Meta maintaining its past revenue growth rates of 37+% and think a lower future growth would be more likely.

Intrinsic Value

Using this information I estimated a future growth rate of 15% for my medium case intrinsic value calculation. I also set a starting cash flow of $35 Billion, which is somewhere between the 2022 cash flow ($19 Billion) and the 2021 cash flow ($39 Billion). I set this starting cash flow to reflect Zuckerburg’s attempts to reign in Metaverse spending.

Here are links to my bull, bear, and medium case intrinsic value calculations:

Medium Case

Bull Case

Bear Case