We are increasing our Meta META fair value estimate significantly to $400 from $322, as we are more optimistic about its profit margin expansion. Meta's fourth-quarter results showed strong network effects, which attracted more users and increased engagement while allowing it to sell more ads at higher prices with lower user and advertiser acquisition costs, impressively expanding margins.
However, we think the stock remains overvalued. Meta's advertising growth may benefit in 2024 from easier comparisons and political ad spending, but we foresee a slowdown in 2025-28 as economic growth moderates. The traditional drivers of digital ad spending growth, such as online users and mobile expansion, are less influential.
#meta-platforms #fair-value-estimate #profit-margin-expansion #overvalued #advertising-growth #geopolitical-risks
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