Why I Think the Market Is Mispricing META (and Overreacting to ‘Dilution’ Fears)

I honestly don’t fully understand why the market is so uneasy about Meta right now, because if you step back and look at it objectively, the situation seems fairly straightforward. Meta is trading at around 18x forward earnings over the next 12 months, which for a company with this level of cash generation, margins, and scale advantages does not look demanding at all.

At the end of the day, the advertising business is not only not deteriorating, but is actually starting to show signs of improvement across several variables at the same time: impressions are going up, pricing is going up, and on top of that, the efficiency of the system driven by AI is improving conversion. To me, that already changes the narrative quite a bit, because you’re no longer talking about a mature, stagnant business, but rather a core business that is still evolving.

And then there is the AI angle, which I think the market is still struggling to properly price in. Because if Meta manages to turn that investment into real returns, not just in advertising efficiency but also in new products, subscriptions, or monetisation within WhatsApp or Instagram, the impact could be massive. It doesn’t need to work perfectly; even a small fraction of their user base starting to monetise additionally already translates into very large numbers purely because of scale.

On top of that, I think there is an important point that a lot of people are overlooking, which is the normalisation of spending that came from the metaverse. If that stops being a meaningful drag, the company’s underlying earnings and free cash flow could improve much more than it looks at first glance.

And then there is another aspect that I think is key and that the market is reading too superficially, which is financing and how capital allocation is being thought about. This is where a lot of people get confused, because they automatically think: “if the stock is cheap, why on earth would you issue shares or structure convertibles?”. But that line of thinking is too simplistic.

Because one thing is whether the stock is “cheap” in relative historical terms or market perception, and another completely different thing is how you optimise the capital structure to fund projects with very high expected ROIC. If you have AI investments in front of you with potentially very high returns on capital, it makes sense to try to finance them with the instrument that best fits the trade-off between cost, flexibility, and risk. And that’s where structures like mandatory convertible preferred shares or similar hybrids come in, which in practice work like a bridge financing instrument: they start off behaving like debt or fixed income, and then convert into common equity later on.

The key point is that this does not invalidate the idea that the stock can be “cheap” today. What it reflects is something else: that the company may prefer not to slow down growth or constrain investment just to preserve the perception of equity undervaluation. In other words, if you believe the marginal return on that capital in AI is higher than the implicit cost of capital, then issuing shares is not “destroying value” — it is actually an attempt to accelerate value creation, even if there is future dilution.

And on top of that, in companies like Meta, this is never a linear game. It’s not “issue shares → dilute → destroy value”, because then you have the other side of the equation: massive cash generation and aggressive buybacks over time. If the cycle is executed properly, you can issue at the right moments, invest, generate returns, and then later repurchase shares in the market using the cash flow generated, partially or even fully offsetting that initial dilution.

And ultimately, all of this comes down to something quite simple: if the market starts to believe that Meta is not just a mature digital advertising company, but a platform with real optionality in AI and new monetisation models, the multiple can change completely. Because moving from 18x to something closer to 25–30x does not require an extreme change in earnings, just a change in how the quality and duration of those earnings are perceived.

That is why, from my point of view, this is less a fundamentals problem and more a problem of perception and probability. The market is still not fully pricing in the most optimistic scenarios, but if they start to be confirmed even partially, the re-rating could be quite significant.

My position in Meta is 35%