Meta Platform Inc. (META) Valuation 10th Feb 2023
10YR Bond Yield 3.67%
Market Risk Premium : 6.73%
Size Risk Premium Added : 2.50%
Terminal Rate into Perpetuity 2.50%
Revenue Growth Rate
CAGR 8.62% – Fair Value $157
CAGR 6.22% – Fair Value $139
CAGR 3.00% – Fair Value $126
Base Year (2022)
Pre-Tax Operating Margin 39.91%, Cost of Capital 14.05%, Effective Tax Rate 19.5%
Year into perpetuity (2032) and beyond
Pre-tax Operating Margin 21.84%,Cost of Capital 11.74%, Effective Tax Rate 21%, Return on Capital used : 10% (Industry Average 22%)
So, our buying range for Meta would remain at the lower range between $125 -$135 by considering the prevailing macro condition. Of course, if there is recession, Meta could fall well below $100 mark