Meta Platforms (META): High-Quality Business at a Bargain Price Meta Platforms remains one of the highest-quality businesses in the world, trading at an unusually attractive valuation. The company is expected to generate $38B in EBIT on $125B in revenue in 2022, with an enterprise value of $442B, or under 12x TEV/EBIT. META boasts 80%+ gross margins, low capital intensity, and continues to grow roughly twice as fast as GDP. At 14.6x 2022E GAAP EPS (before adjusting for excess cash), META trades at a discount to the S&P 500's 17x multiple, despite its stronger fundamentals and balance sheet. ⸻ Why the Stock Is Down – And Why It Should Recover META has fallen roughly 55% from its peak for five main reasons — all temporary, in my view. 1. Metaverse / Reality Labs Spending Meta invested $10B in 2021, an estimated $15B in 2022, and $16B in 2023 in Reality Labs. Investors worry about both the uncertain payoff and Meta's dependence on platforms like Apple's iOS for user access. However, Meta has a long track record of smart capital allocation (Instagram, WhatsApp), and Zuckerberg has both control and personal financial incentive to allocate prudently. Even if the metaverse becomes only a strong gaming platform, it could plausibly be worth $50–100B+ in the future. 2. Competition (TikTok, Snapchat, etc.) Social platforms constantly evolve — Facebook now skews older, Instagram dominates under-40s, and TikTok attracts the youngest users. Meta has consistently adapted, integrating key engagement features from competitors. While acquisitions may be off the table, Meta's scale, balance sheet, and adaptability remain major advantages. 3. Apple Privacy Changes Apple's iOS privacy updates disrupted Meta's ad-tracking (via the Facebook Pixel), temporarily hurting ad efficiency. But the impact is fading as advertisers adjust campaign strategies and Meta refines its data collection. Facebook remains the most effective advertising platform in the world. 4. Regulation Regulatory headlines are constant, but the real risks are overstated. Legislative or court-driven changes are slow and uncertain, and Meta can adapt as Mastercard and Visa did when facing structural challenges. Businesses this large, essential, and ingrained in daily life are hard to regulate away. 5. Market Rotation The broader market shift away from growth stocks—first the speculative "pandemic winners," now the large-cap "generals"—has pulled down even quality names like META. This is sentiment-driven, not fundamental. ⸻ The Opportunity At $170/share, Meta's stock already reflects these fears. The company isn't growing at its prior breakneck pace, but it still has enormous scale, durable earnings power, and a fortress balance sheet. Few firms can invest $50–60B over four years into a new product line—all funded by internal cash flow. No matter how the next few years play out, shareholders are positioned well: • If Reality Labs succeeds, upside is significant. • If it fails, spending will be curtailed, and free cash flow will surge. • If markets remain volatile, META's quality will shine. • If markets rebound, META will benefit from passive fund inflows. • If nothing happens, META should still deliver low double-digit EPS growth for years. This is one of the world's great businesses trading at a clear discount. The pessimism won't last forever. ⸻ Catalyst: Signs of progress at Reality Labs, evidence that Apple iOS headwinds are fading, or improving investor sentiment could re-rate the stock. In the meantime, you own a dominant, cash-generating franchise at a compelling valuation.