Meta Investment Case!
3.35B DAUs, Growing ARPU, WhatsApp Monetization for just 21 P/E.
Last month, Meta had one of the best and longest stock market streaks ever, with the stock rising for 20 consecutive days in a row. During this time, the stock gained over 20%. Since then, the chaos of Trump’s economic policy has sent the whole market down, but Meta remains the best-performing Magnificent 7 stock year to date.
However, let’s remember that not that long ago the company was getting no love from the market.
As interest rates went up, many businesses had less funds to spend on advertising. Simultaneously, TikTok was exploding on the scene, increasing competition for eyeballs. Additionally, Apple’s privacy policy reduced Meta’s ability to effectively target ads.
These factors caused Meta’s revenue to flatline at the worst possible time, as the company was ramping up investment in its Reality Labs division.
Slowing revenue and increased expenses caused profits to fall 41%. This created a panic, pushing the stock down 76%.
Since then, the recovery has been extraordinary, with the stock rising almost 600% from the lows!
Today, Meta is executing on all fronts, and in this article, I will present its Investment Case.
Meta’s Investment Case is driven by a growing user base, increased user monetization, especifically, WhatsApp monetization, and AI. As always, I will conclude with a valuation model.
Let’s scroll down!
1. Turnaround
2. Growing User Base
3. Increased User Monetization
4. WhatsApp Monetization
5. AI
6. Reality Labs
7. Valuation
8. Conclusion
9. P.S. Trump’s Trade War
1. Turnaround
First, let’s quickly discuss this amazing turnaround.
During Meta’s transition from desktop to mobile, many investors believed that Meta’s business would deteriorate. The logic was that smaller screens mean fewer and less effective ads.
Whilst that clearly wasn’t the case, the current mobile-centric business has made Meta heavily reliant on Apple and Google for distribution. Apple reminded Meta of that power in 2022 with the changes to their app tracking policy.
Meta makes money with advertising. How much advertisers pay for an ad is determined by the expected revenue generated by that ad.
Simply put, more effective ads generate more revenue!
For years, Meta relied on cookies that shared data between apps, to improve ad-targeting. Apple decided to change their rules to essentially, ban such use of data sharing. According to Meta, this new Apple policy cost them $10B in 2022.
Whilst Apple argued that this was done for privacy, many people, me included, thought that this was just an excuse. The real objective was to weaken Meta and others whilst strengthening Apple.
Even before this incident, founder and CEO Mark Zuckerberg had made it clear that his life's mission is to not be dependent on Apple and develop the next technology that will dominate our lives. But after this episode, Apple and Meta are essentially enemies.
This is why he changed the name of the company from Facebook to Meta!
This is why he has spent over $70B on Reality Labs since 2019!
This is why he is spending billions on AI!
Mark Zuckerberg sees Apple and Google as existential threats to his company and wants to be ready to dominate the next form factor. Which he believes to be VR, AR and AI.
This strategy has started to pay off handsomely in the last 2 years.
Meta released their TikTok copy Reels globally in February of 2022, improved advertising targeting using AI, and rewrote their algorithms to succeed in the post-Apple changes era.
These moves enabled revenue to grow 16% in 2023 and 22% in 2024. Whilst significant cost-cutting drove net income up 169%!
Now that Meta has returned to growth, let’s look at the future.
2. Growing User Base
Meta’s scale might be hard to comprehend, as it is absolutely massive. 3.35B people use one of Meta’s apps every day. It’s even more impressive when one considers that Meta has no business in China as all of their apps are banned there.
This means that around 50% of the 6.68B people outside China are Meta’s customers!
This is a completely mind-boggling scale. And the scary thing is that Meta keeps getting bigger.
In 2018, Meta's suite of apps had a user base of 2.03B. Over the past six years, the company has expanded its reach by 1.32B users. Notably, in the past year alone, Meta added 160 million new users, underscoring its continued global growth.
If we exclude China, there are approximately 2.2B people in the world without access to the internet. The majority of these people are in developing countries such as India, Pakistan, Nigeria, Indonesia, and others. As these people come online, Meta’s apps such as WhatsApp, Facebook, and Messenger, are some of the first that people download.
It is believed that by 2030 over a billion people will gain access to the internet!
Additionally, young people tend to be more tech-savvy. As Meta’s existing core markets go through a generational shift, the company is poised to gain hundreds of millions of new users.
Overall, I see a path for Meta to gain 1 billion new daily active users in the next decade!
3. Increased User Monetization
Not only is Meta attracting hundreds of millions of new users, but the company is also consistently finding new ways to monetize them.
In the graph above, we can see the continued rise of Meta’s ARPU. In 2012, the company made only $5.3 from each user.
By 2023, ARPU had grown to $44.6, an increase of 738%, a CAGR of 21.3%!
Here, we see how the transition to mobile was not detrimental at all. During Meta’s desktop era, people were only using Facebook for a few hours a day at home or work. The smartphone revolution that accelerated with the release of the iPhone 4 and the Samsung Galaxy S series, enabled Facebook and Instagram to be used everywhere.
Facebook saw this shift coming. This is what drove the decision to pay $1B for Instagram in 2012 and $19B for WhatsApp in 2014. At the time, it seemed an outlandish amount of money, but today in hindsight seems a bargain.
Nowadays, the amount of time people spend on Meta’s apps is staggering. Higher time spent allowed the company to show more ads. Meanwhile, better targeting enabled Meta to charge more for each ad. This is a potent combo that results in stratospheric growth.
4. WhatsApp Monetization
When in 2014 Facebook spent $19B to acquire WhatsApp, many analysts and investors were puzzled. While WhatsApp had 450M users, it was a simple messaging app with zero revenue. For close to a decade, the focus was on adoption, not monetization.
As of March 2025, WhatsApp has around 2.95B monthly active users globally, solidifying it as the world’s most popular messaging app. While WhatsApp dominates the emerging markets, with over 500M users in India alone, in the last few years it has shown especially strong growth in the US, reaching 100M monthly active users.
While Meta doesn’t disclose WhatsApp revenue, The Business of Apps website estimates it to be around $1.8B, just 1% of Meta’s total revenue.
While a small segment, in the graph above, we see that it is growing extremely quickly, with quarterly revenues up 375% since Q1 2018.
Meta is in the early stages of WhatsApp monetization, with the app set to become a huge revenue growth driver!
Here’s why I believe Meta has a clear, realistic path to generating $100B in revenue from WhatsApp within the next 10–15 years:
WhatsApp for Small Businesses
Meta wants WhatsApp to become a key app that small and medium-sized businesses use to not only communicate with clients but also to do business. Its basic WhatsApp for Business App enables small businesses to simply and affordably communicate with their customers.
The most basic features are free, but there is huge potential to upsell various premium features such as automation and bots. In the US alone there are over 34 million small businesses that employ over 59M people. Catering, plumbers, realtors, electricians, beauty salons, and more already use WhatsApp to communicate with their clients.
By offering a dedicated communication and sales product Meta aims to improve user experience and drive increased adoption.
There is huge potential for Meta to turn WhatsApp into a must-have sales tool for millions of small businesses around the globe!
In some emerging markets such as India and Brazil, Meta is working to turn WhatsApp into a commerce app that not only facilitates communication but also the sales process itself through e-commerce stores and payments.
WhatsApp peer-to-peer payments in India and Brazil enable people to transfer money to their friends and to pay for goods and services, directly in the App.
Additionally, Meta is building an in-app commerce and shopping offering, that includes stores, product and service catalogs, business profiles, and more. There are various integrations with commerce platforms such as Shopify, Mercado Libre, and JioMart to facilitate transactions within chats. Meta will earn revenue by charging various transaction, and operational fees to merchants.
E-commerce is a multi-billion dollar opportunity for WhatsApp!
WhatsApp for Large Businesses
For larger businesses, Meta offers what it calls a “WhatsApp Business Platform”. This is a powerful solution that comes with API’s and features designed to help large businesses to simply and effectively communicate with their clients.
Customer support, transaction tracking, alerts, and marketing messages to upsell on existing sales and generate new ones.
It allows integration of WhatsApp messaging into a client’s customer relationship management software, or marketing automation platform, such as Salesforce or Mailchimp.
Meta charges businesses per conversation, not per individual message and the price is determined by the market and by conversation type. Marketing messages are the most expensive whilst authentication and utility messages are cheaper. Meanwhile, service messages that are responses to questions initiated by users are free of charge.
For example, in the Netherlands, a marketing conversation costs $0.1597, whilst the same conversation costs $0.0239 in Mexico.
Large customers include JP Morgan Chase, KLM, Lufthansa, Amazon, Mercado Libre, Netflix, Vodafone and more.
Open rates for WhatsApp messages are much much higher than for SMS, sometimes 90%+.
WhatsApp is well-positioned to become the preeminent customer service and communication tool for large global customer-centric enterprises!
Precedence Research estimates that the global customer self-service software market will grow with a 21.64% CAGR to reach $128B by 2034!
If Meta captures 10% of this market with WhatsApp, that would mean $12.8B in revenue just from this segment alone!
Click to WhatsApp Ads
A huge growth driver for WhatsApp is its integration with Facebook and Instagram for click-to WhatsApp Ads.
The goal of an advertisement is to generate sales for the advertiser. On Facebook and Instagram, that usually means getting a potential customer from the advertisement to one’s website. Instead of sending the customer to the website, click to WhatsApp ads send them to WhatsApp.
In the picture above, we see how it works, an ad for insurance leads to WhatsApp, enabling the customer to communicate with a salesperson or chatbot.
How many times have you clicked on an ad that takes you to a website, and after looking for 30 seconds, you got overwhelmed and thought, ” Ahh, never mind,” and closed the website? My guess is many times.
A click to WhatsApp ad has the potential to simplify the sales process and generate high-intent conversations!
Think about it, what would a business pay to have their sales chat right next to a person’s conversation with their grandma? People open WhatsApp many times a day, and they would still see this sales chat, and they could easily return to it. A business can send an easy message to reignite the conversation. A message WhatsApp will charge for of course.
This service is simply genius. Essentially, not only businesses are helping Meta with its goal of turning WhatsApp into an app for commerce, but they are also paying Meta to do so.
The more businesses use click to WhatsApp ads, the more conversations with businesses people will have on WhatsApp. These chats are crucial for changing the image of WhatsApp from an app one uses to chat with family to an app one can buy stuff on.
Additionally, this service is synergetic with Meta’s other apps!
It creates more demand for Facebook and Instagram ads by enabling businesses that don’t have a website to advertise. Not every business needs or has a website, especially in emerging markets! This higher demand for Facebook and Instagram advertising increases Meta’s pricing power, enabling the company to charge higher ad rates.
Moreover, usually, when the user clicks on an ad, they end the session and leave Meta’s apps, however, by sending them to WhatsApp instead, they remain in Meta’s ecosystem. This increases ecosystem time spent, which eventually leads to higher revenues.
5. AI
A lot of investors don’t realize how seriously Meta is investing in AI development. Meta is expected to spend over $180B on capex in the next 3 years, a large share of which will be spent on acquiring semiconductor chips needed for training and running AI models.
The main goal is to use AI to improve user experience by serving more relevant and interesting posts to their users!
AI has the potential to identify videos and posts that have the potential to go viral and push them out to a large audience. Furthermore, it can analyze a person’s viewing habits and predict with greater accuracy whether a person will enjoy a particular video. This will increase user satisfaction and time spent on the apps. Improved user satisfaction and higher time spent on the app drive revenue growth.
But that is just one area, here is how Meta is posed to reap huge benefits from the adoption of AI across its entire business:
AI Ad Targeting
As I mentioned earlier, Meta really took a beating when Apple implemented a new privacy policy that significantly reduced Meta’s ability to effectively target ads on Instagram and Facebook.
One of the key ways in which Meta solved the issue was by using AI to improve advertising targeting!
Meta built powerful AI models that use first-party data generated by the users of Facebook and Instagram to better predict user interests and behavior. This enabled the company to serve more relevant ads without relying on data from 3rd party cookies. Additionally, it built AI features that optimize advertising performance in real-time.
Meta’s key innovation is what it calls “look-alike audiences”!
It uses AI to analyze user behavior and groups them into categories with users of similar interests. It then shows ads to these look-alike user groups and learns which advertising works the best, before rolling it out across the whole group. The assumption is that an ad that worked on one member of the “look-alike audience” has a higher probability of working on the whole group.
We are still in the early days of AI, so there is massive potential for Meta to further improve ad targeting with AI!
AI Ad Creation
The challenge of creating an effective advertisement is a bottleneck that suppresses the demand for Meta’s ads. There are small businesses that have the capital and the desire to advertise but lack knowledge of how to create and run an ad.
AI will significantly reduce the barriers to entry for millions of small businesses that want to advertise!
I asked ChatGPT to create a poster for a Miami pizzeria to advertise for a fictional Tuesday Miami Heat vs Boston Celtics NBA game.
This is the result:
Honestly, this poster is much better than I expected. This will enable so many businesses to quickly and efficiently create advertising. From local pizzerias, plumbers, and beauty salons to car garages, carpenters, and pool cleaners.
Apart from small businesses, large and medium-sized businesses spend significant sums of money to create Facebook and Instagram ads. As these businesses replace well-paid Photoshop designers with AI and cancel Adobe licenses, they stand to save billions upon billions of dollars.
I would say that it is very likely, that any cost savings that come from AI creating ads will be spent on more ad placements!
Higher demand for ads leads to higher prices.
AI Services
Meta is determined to turn WhatsApp into the most important sales and customer communications app in the world.
Currently, there are hundreds of different automation software providers that enable businesses to automate their communication with WhatsApp. Why wouldn’t Meta take this business in-house?
I do not doubt that they will eventually do so. Customer service chatbots, and various other automation can be easily integrated into Meta’s offering.
Once Meta provides these AI services within WhatsApp, there is potential to take them outside its platform and offer them to other companies.
6. Reality Labs
Meta is a leader in virtual and augmented reality, with its Quest 2 VR headset having sold over 20M units worldwide. According to the market intelligence firm IDC Worldwide, as of 2024, Meta controls 70.8% of the VR headset market.
This dominance hasn’t come cheap, as Meta lost $17.7B in 2024.
In the graph above we see that while the revenue of the Reality Labs division has plateaued, the losses have increased every year, with Meta losing over $68B in the last 6 years.
My take is that either something comes out of this division, or they will shut it down. In either case, this will be a headwind for margins. If Meta figures out the VR/AR game, then there is potential for earnings. If they close the division the operating income will increase by $17.7B.
Let’s remember that Meta made $69.5B in operating income last year, a margin of 41.5%.
If we exclude the Reality Labs losses, Meta made $87.3B in operating income last year, which is a margin of 53%!
The next few years will be very interesting, Mark Zuckerberg wants to be in control of the next form factor so I find it likely that they figure it out and start making some profits in the Reality Labs division. However, I am doubtful that these investments will create a business anywhere near as profitable as the current Family of Apps business.
7. Valuation
Meta’s market cap now is $1.3T, 30% off from its all-time high. Even though Meta’s stock has performed incredibly well in the last 3 years, up 124%, I find it to be reasonably priced.
In the above picture, I have placed some key valuation metrics for Meta. Currently, it trades for a P/E of 21 and a P/FCF of 24.
Analysts expect Meta to grow revenue and EPS by 14.5% and 3% in 2025, whilst over the next 3 years revenue and EPS are set to grow by 45.3% and 36.7%. These growth estimates result in a 2027 P/E of 15 and P/FCF of 17.
FCF is currently depressed because Meta is in a heavy capex cycle, driven by significant AI investments. These AI investments should generate meaningful returns post 2026-2027.
Overall, I find it likely that Meta will overperform analyst expectations. I think that analysts might be overlooking the WhatsApp monetization story.
I built a valuation model that has slightly better assumptions.
Valuation Model
As mentioned in the user growth section, I believe Meta is poised to add a billion new users in the next decade, and in my valuation model, I estimate them adding 650M users by 2030.
Meanwhile, largely thanks to increased WhatsApp monetization, improved ad targeting, and roll out of AI across Meta’s business, I model ARPU growing with an 11% CAGR till 2030.
The result of growing users and increased ARPU is for revenue to grow with a 15% CAGR till 2030!
Additionally, I model a slight improvement in operating margin from 41.5% to 44% by 2030.
With these assumptions, the 2030 results are as follows:
Revenue of $373.5B up 127% from 2024.
Operating Income of $164.4B, up 141%.
Net Income of $134.8B, up 116%.
As Meta has been actively buying back its stock, I model a 1.5% average yearly reduction in share count by 2030.
With these assumptions, I get to the target price of $1,164 to $1,746 per share.
That is an upside of 133-249% to the current share price, a CAGR of 15-23%!
8. Conclusion
Meta is a digital empire set to dominate for decades to come!
The company went through a dramatic transformation, bouncing back from a 76% drop with a nearly 600% gain from the lows. From weathering Apple's privacy policy changes to countering TikTok's rise, Meta has emerged more focused, more efficient, and more ambitious than ever.
With 3.35B daily active users, Meta operates at a mind-boggling scale. Nevertheless, thanks to the quality of their services such as Facebook, Instagram, Messenger, Reels, WhatsApp, and Quest, the company is well-positioned to gain a billion new users in the decade to come.
But user growth is just the beginning.
Meta’s real edge lies in its ever-increasing monetization engine!
The company's ARPU has grown at a 21% CAGR over the past decade and that's before the serious WhatsApp monetization even began.
WhatsApp, with its 2.95B monthly active users, is a sleeping giant set to be awoken from its decade-long slumber.
Over the next 10–15 years, WhatsApp could realistically become a $100B revenue business!
In addition to becoming the most important sales tool for millions of small businesses, it is set to become the preeminent customer service tool for large corporations. These are already loft goals, but for Meta, it is not enough, they are building features to turn WhatsApp into an e-commerce and payments juggernaut.
Even after its monster stock rally, Meta trades at a reasonable P/E of 21, with strong earnings growth ahead. My valuation model estimates that revenue could more than double by 2030 to $373B, with net income reaching $135B.
Such a growth could deliver 133-249% gains to investors by 2030!
Meta is no longer just a social media company, it’s an AI, commerce, and communications software giant with more levers for monetization than most investors realize. And those levers are nowhere close to finished turning!
Meta might not only dominate the next form factor, but it could also end up redefining it!
9. P.S. Trump’s Trade War
Trump started his trade War after I had already written the article so let’s quickly discuss how I think it could affect Meta.
The majority of Meta’s revenue comes from providing digital services, so it is not directly affected by the tariffs. However, Meta’s Quest VR sets are manufactured in China and Vietnam, so they are likely to get more expensive.
The biggest risk to Meta is if some countries decide to retaliate with non-tariff measures. There is talk in the EU of implementing digital tax aimed at American Big Tech companies. Other countries might decide to retaliate with similar measures.
Of course, if Trump causes a global depression on par with 1929 as some economists fear, then Meta’s business would suffer. Advertising rates would most certainly fall in such a case.
These tariffs might have some effect on Meta in the short term, but in the long term, I believe Meta’s business fundamentals remain intact!
My view is that these measures will not be in effect for long. The pushback not only from tariffed countries but also from the US business community and Republican politicians has been incredibly strong. It is increasingly becoming very likely that the Republicans will get absolutely destroyed in the midterms in 2026.
Thus, I find it likely that Trump will backtrack. He will get some concessions and sign some deals, make them a bigger deal than they actually are, and call it a win. Regardless of how actually beneficial these deals might be for the US economy.
Thank you for reading Global Equity Briefing!
Global Equity Briefing is an investing newsletter with a focus on analysing global companies. I have written highly detailed Deep Dives on Ferrari, Palantir, Grab, Celsius, Mercado Libre and Hello Fresh!
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