Is Meta Platforms Inc (META) Overvalued or Fairly Priced? A DCF and Margin of Safety Analysis

Meta Platforms Inc (NASDAQ: META) has long been a focal point for investors navigating the tech sector's volatility. With a stock price of $658.69 as of December 29, 2025, and a recent fourth-quarter revenue surge of 21% year-over-year to $48.39 billion, the question of whether the stock is overvalued or fairly priced demands rigorous scrutiny. This analysis employs discounted cash flow (DCF) modeling and margin of safety principles to assess Meta's valuation, drawing on its financial performance, growth projections, and cost of capital assumptions.

DCF Model: A Tale of Two Scenarios

The DCF model hinges on three critical inputs: free cash flow (FCF) projections, the weighted average cost of capital (WACC), and the terminal growth rate. For Meta, these inputs reveal a nuanced picture.

Free Cash Flow and Growth Assumptions
Meta's 2025 FCF of $44.8 billion reflects its dominance in digital advertising, which accounts for 98% of its revenue. Analysts project FCF growth of 10–18% annually through 2030, driven by operational efficiency and AI infrastructure investments. Beyond 2030, growth is expected to decelerate to 4–10%, with terminal growth rates ranging from 3.3% to 4%. These assumptions account for Meta's maturing business and the challenges of sustaining hypergrowth on a $183.46 billion revenue base.

WACC: A Range of Estimates
Meta's WACC is a contentious variable. A report by Gurufocus cites a WACC of 3.15% as of December 31, 2025, reflecting its low debt costs and strong equity returns. However, other platforms, including Finbox and AlphaSpread, estimate WACC at 7.42–9.5%, underscoring divergent methodologies and assumptions about risk premiums and beta. This wide range highlights the sensitivity of DCF outcomes to capital structure choices.

DCF Valuation Outcomes
Using a mid-range WACC of 7.42% and a terminal growth rate of 3.5%, a DCF model values Meta at approximately $720 per share, suggesting the current price of $658.69 is undervalued. Conversely, applying a higher WACC of 9.5% reduces the intrinsic value to around $580, implying overvaluation. The disparity underscores the importance of WACC assumptions in DCF analysis.

Margin of Safety: Buffer Against Uncertainty

Upside and Downside Risks
Meta's growth in AI and VR/AR-projected to grow at 37.6–44.5% CAGR through 2030-offers upside potential. However, regulatory scrutiny, ad revenue saturation, and capital expenditure pressures pose risks. For instance, Meta's increased spending on AI infrastructure, while strategic, could temporarily depress margins.

Price-to-Intrinsic Value Gap
If we take the DCF range of $580–$720 as intrinsic value, the current stock price of $658.69 sits near the midpoint. This suggests a relatively narrow margin of safety, particularly if WACC assumptions trend toward the higher end of estimates. Investors seeking a wider buffer might prefer a price closer to $580, aligning with a conservative WACC of 9.5%.

Conclusion: A Nuanced Verdict

Meta's valuation appears neither grossly overvalued nor significantly undervalued. The DCF model's sensitivity to WACC and growth assumptions means the stock's fair value hinges on investors' confidence in Meta's ability to sustain profitability and manage capital costs. A WACC of 7.42% supports a fair valuation, while higher WACC estimates tilt toward overvaluation. Given Meta's strong balance sheet and strategic investments, a cautious investor might view the current price as fairly valued, with upside potential if growth in AI and ad efficiency outperforms expectations.