Meta Stock Is Off Its Highs, and Could be Cheap - What's the Best META Play?

Meta Platforms Inc (META) stock is off its recent highs after the Q1 earnings release. META could be cheap based on revenue, operating cash flow, capex, and free cash flow forecasts. Value investors are looking at shorting OTM puts.

META closed at $611.21 on Monday, May 18, down slightly. However, it's well off a recent peak of $688.84 on April 17, before the April 29 earnings release. It's still up from a March 30 trough price of $536.38.

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Strong FCF and Capex Outlook

Meta delivered strong YoY free cash flow (FCF) last quarter (+19.9%), despite a 47% YoY increase in its capital expenditures (capex). This can be seen in the table provided by Meta Platforms on page 15 of its shareholder deck presentation.

Meta likes to include principal payments on its finance leases, as a form of capex (Meta says it's irrelevant that the company borrows money to pay for “plant”). Most other tech companies, other than Amazon, don't do this. However, even with this measure included, FCF rose significantly, though it was down last quarter.

However, more importantly, Meta projected that it intends to spend between $115 billion and $135 billion (see page 8 of the earnings transcript) on capex this year. That's +73% higher than the $72.215 billion in capex and finance lease principal payments made during 2025.

That works out to just $10.42 billion per month (i.e., $125 midpoint/12) or $31.26 billion per quarter. That is well over the $19.84 billion in Q1 capex, incl. principal payments on finance leases. It implies another +57.5% increase in quarterly capex/principal payments on finance leases compared over the next year, compared to Q1.

As a result, to project future FCF, forecast its operating cash flow, and then deduct the expected capex payments. From that, we can derive a fair value for META stock.

Projecting Meta's FCF

For example, analysts now forecast that Meta's 2027 revenue will rise to $301.63 billion. Multiplying this by its trailing 12-month (TTM) operating cash flow (OCF) margin will allow us to project its future OCF.

For example, Stock Analysts reports that its TTM OCF was $124 billion as of Q1. Since its TTM revenue was $214.62 billion, that means its TTM OCF margin was 57.77% (i.e., $124b/$214.62b).