Meta Platforms, Inc.METANASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $1,010.67 per share(market-calibrated)
+54.6%
Upside to Fair Value
Current
$653.56
Pure Model
$1,004.93
Fair Value
$1,010.67
Bull Case
$1,479.32
Bear Case
$653.18
Market Reality Check
Model Terminal Growth
3.75%
Market-Implied Growth
4.16%
Calibrated Growth
3.89%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,004.93.
What's Driving This Ratingfor META
↓
CapEx normalizing toward maintenance
Historical CapEx is 18.33% of revenue (heavy investment phase). Model fades this to 6.00% by Year 10, freeing up ~$78.9B in annual FCF. This is the biggest driver of long-term cash flow improvement.
↑
Margin expansion modeled
Current EBIT margin is 37.33% — below the sector mature average of 41.44%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $238.6B (37.33% margin).
↑
Strong near-term revenue growth
Analyst consensus projects 24.54% revenue growth in Year 1, fading to 12.54% by Year 5 and 3.75% by Year 10. Revenue reaches $639.4B by Year 10 (vs $201.0B today).
↔
Perpetuity and exit methods disagree
Perpetuity growth gives $619.19/share (17.2x terminal FCF) while exit multiple gives $1,390.66/share (47.1x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.
✓
Model and market roughly agree
Market-implied terminal growth of 4.16% is close to the model's 3.75% (only 41bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.
→
Moderate cash flow conversion
Year 10 FCF/EBITDA conversion is 59.39% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.28
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)10.28%
Cost of Debt
Pre-tax Cost of Debt0.33%
Tax Rate29.64%
After-tax Cost of Debt0.23%
Equity Weight (E/V)95.15%
Debt Weight (D/V)4.85%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (95.15% × 10.28%) + (4.85% × 0.23%)
= 9.79%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $250.3B | $345.5B | $450.9B | $544.5B | $639.4B |
| EBIT | $93.4B | $129.0B | $168.3B | $203.3B | $238.6B |
| Tax | $27.7B | $38.2B | $49.9B | $60.3B | $70.7B |
| NOPAT | $65.7B | $90.7B | $118.4B | $143.0B | $167.9B |
| + Depreciation | $15.4B | $21.3B | $27.8B | $33.6B | $39.4B |
| - Capex | $45.9B | $53.9B | $57.9B | $55.1B | $38.4B |
| - Δ NWC | $8.1B | $8.1B | $8.3B | $7.4B | $3.8B |
| Free Cash Flow | $27.1B | $50.1B | $80.0B | $114.1B | $165.1B |
| Discount Factor | 0.911 | 0.756 | 0.627 | 0.520 | 0.393 |
| Present Value | $24.7B | $37.8B | $50.1B | $59.3B | $64.9B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$165.1B
Terminal Growth Rate3.75%
WACC9.79%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$2.8T
PV of Terminal Value$1.1T
Exit Multiple Method
Year 10 EBITDA$278.1B
Exit Multiple (EV/EBITDA)28.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$7.8T
PV of Terminal Value$3.1T
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$494.5B
PV of Terminal Value$1.1T
Enterprise Value$1.6T
(-) Net Debt$48.0B
Equity Value$1.6T
Shares Outstanding2.5B
Price per Share$619.19
Exit Multiple Method
PV of Projected FCFs$494.5B
PV of Terminal Value$3.1T
Enterprise Value$3.6T
(-) Net Debt$48.0B
Equity Value$3.5T
Shares Outstanding2.5B
Price per Share$1,390.66
Pure Model Fair Value
$1,004.93
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 2.75% | 3.25% | 3.75% | 4.25% | 4.75% |
|---|---|---|---|---|---|
| 7.79% | $1,245.87 | $1,282.29 | $1,327.72 | $1,385.98 | $1,463.39 |
| 8.79% | $1,093.56 | $1,116.48 | $1,143.94 | $1,177.46 | $1,219.26 |
| 9.79% | $971.70 | $987.04 | $1,004.93 | $1,026.03 | $1,051.33 |
| 10.79% | $870.71 | $881.44 | $893.71 | $907.85 | $924.33 |
| 11.79% | $784.98 | $792.76 | $801.51 | $811.41 | $822.72 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$653.18
-0.1% vs current
- • -25% vs analyst consensus
- • Terminal growth: 3.3%
- • Beta: 1.60
Base Case
$1,004.93
53.8% vs current
- • Analyst consensus
- • Terminal growth: 3.8%
- • Beta: 1.28
Bull Case
$1,479.32
126.3% vs current
- • +25% vs analyst consensus
- • Terminal growth: 4.3%
- • Beta: 1.09
Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth24.54%
Year 3 Revenue Growth16.57%
Year 5 Revenue Growth12.54%
Year 7 Revenue Growth9.02%
Year 10 Revenue Growth3.75%
Terminal Growth Rate3.75%
Margin & Efficiency
Current EBIT Margin37.33%
Terminal EBIT Margin41.44%
Tax Rate29.64%
Historical Capex / Rev18.33%
Terminal Capex / Rev6.00%
NWC / Revenue16.47%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.