On April 4, Meta Platforms META released Llama 4 LLM, its next-generation large language model, which can understand and generate content across various formats such as text, images, and video.

Why it matters: With leading artificial intelligence labs continuing to invest billions of dollars in frontier models, we see the models being commodified over time, with all leading-edge models offering a similar slate of capabilities. We see Llama 4 as roughly at-par with the latest models by Google and OpenAI.

• Over time, we believe the current model-based competition in AI will give way to distribution and monetization-based competition. As the competitive dynamics of AI shift, we believe Meta, with its unrivalled user and creator base, can effectively distribute and monetize its GenAI investments.
• We see Meta’s GenAI models being leveraged by creators and advertisers to create hyper-personalized content for users, which should also benefit user engagement and monetization over time. We see Llama 4, and its multimodal capabilities, as a step in this direction.

The bottom line: We maintain our $770 fair value estimate for wide-moat Meta and view the stock as materially undervalued, with a $500 stock price implying a 20 times adjusted price/forward earnings multiple.

• While a tariff-induced macro slowdown could depress advertising spending, a great deal of uncertainty remains on how long lasting these US tariffs will be.
• In the case that the US tariffs persist and invoke a retaliatory response from key markets for Meta, such as Europe, we’d expect a 15% fair value estimate decrease as near-term revenue comes under material pressure. Even if this were to transpire, Meta would screen as undervalued.

Between the lines: While the broader macro outlook remains dreary, we believe the near-term uncertainty around TikTok’s US operations could bring in additional dollars to Meta’s ad business, possibly alleviating some of the tariff-induced advertising spending pains.