Meta grew earnings by 50% in Q4 2024

META’s revenue grew 21% to $48.4 billion, and EPS grew 50% to $8.02 compared to last year. I like this report for the following reasons:

Revenue is growing faster than expenses, reflecting the effective use of capital. Total expenses only grew 5% YoY compared to 21% revenue growth.
The company has become more profitable, with operating margin grew from 41% to 48%.
Daily active people continue to grow 5% to 3.35 billion, this is very impressive considering their already huge user base.
Significant growth in WhatsApp business platform, reflected in the 55% growth in the “Family of Apps other revenue”. This revenue is only $519 million for Q4, but it has great potential going forward as Meta continues to monetize the WhatsApp platform.
Meta started to roll out custom silicon to the ranking and recommendation workloads (inference only). The company plans to continuously develop the custom silicon in 2025 to be able to handle some of the training workloads. Hopefully this will reduce Meta’s dependency in Nvidia GPUs for AI training and further reduce costs.
Meta plans to start building AI engineering agents that have coding and problem-solving abilities of around mid-level engineers. This has significant potential to further reduce expenses.

Using the latest TTM free cash flow, the intrinsic value of Meta stock is about $719 using a DCF model, indicating a 10.7% CAGR in the next 5 years, here are the assumptions:

Latest TTM FCF $52.103 Billion
FCF growth rate of 15% (5YR AVG 21.73%)
Share repurchase of 2% per year (5YR AVG 2%)
Future Price/FCF ratio of 25 (5YR AVG 25.5)
Discount rate of 10%

In this valuation, I used a price/FCF of 25 instead of 20 compared to last quarter, I personally think this valuation is still reasonable given the company’s solid performance and future potentials. I think the stock is on the expensive side and I do not plan to add to the position unless there are significant price drops.

You can find all of my previous META stock using this link.

Holdings Disclosure

SoloFIRE META ownership: 18% of portfolio
SoloFIRE META Average Cost Paid: $190
META price as of writing: $689.18
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.