Meta Earnings are up 37% in Q3

Meta’s META family of apps continue impressive growth on top of an already enormous user base, with daily active people growing another 5% YoY to 3.29 billion. The network effect is still going very strong. Here are some highlights in this quarter:

• Revenue increased 19% YoY to $40.589 billion
• Diluted EPS grew 37% YoY to 6.03
• Repurchased $8.9 billion of stock, which is 0.6% of total shares
• The company has $70.9 billion in cash and $28.8 billion in debt, they can pay off all of their debt instantly if they want
• The WhatApp business messaging platform is growing really fast, this result can be observed from the Family of Apps other revenues, which was up 48% to $434 million.
• WhatsApp has just passed a milestone of 2 billion calls made globally every day and continue to grow really fast, this has the potential to become a growth engine for Meta in the future if they can monetize it better.
• Meta AI now has more than 500 million monthly active users. Improvements to Meta’s AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year alone.
• The reality lab continues to lose money but I’m impressed by the result. The newly demoed at Meta Connect full holographic AR glasses Orion looks really promising and I think it has great potential. The new version of Rayban smart glasses is also selling quite well.
• Stock based compensation is up 21.7% YoY to $4.250 billion, which is significant. I’m not happy to see this and hopefully it will get under control going forward.

The estimated fair value of the stock using the DCF model is $557.64, indicating a 9.60% CAGR. Here are the assumptions:

• Latest TTM FCF $50.691 Billion
• FCF growth rate of 15% (5YR AVG 22.59%)
• Share repurchase of 1.92% per year (5YR AVG 1.92%)
• Future Price/FCF ratio of 20 (5YR AVG 25.64)
• Discount rate of 10%

I calculated the above valuation with conservative estimates and the company is currently traded at a fair price. I believe Meta will deliver great returns over the long-term because there are still a lot of untapped growth potential from products like WhatsApp, Thread, AI agent and mixed reality devices.

You can also see my past Meta stock analysis using this link.

Holdings Disclosure

• SoloFIRE META ownership: 17% of portfolio
• SoloFIRE META Average Cost Paid: $190
• META price as of writing: $567.58
• Holding time: 4 years

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DISCLAIMER: SoloFIRE is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.