Financially, Meta generates enormous free cash flow, with $63.2 billion in revenue coming from the United States and Canada (primarily the United States), $45 billion from the Asia-Pacific region, $38 billion from Europe, and $17.92 billion from the rest of the world. The company has minimal debt concerns, as they could pay off over half their debt using a single year’s $54 billion free cash flow. While Meta derives nearly all revenue from advertising, their ecosystem’s self-sustaining network effect differentiates them from search-based advertising platforms like Google, which face higher switching costs.

Meta’s costs are well-managed, with R&D representing about 27% of revenue (down 3% since 2022) and “cost of revenue” at approximately 18%. The company initiated a $5 billion dividend in 2024 (0.34% yield) and has authorized $51.28 billion in share buybacks for 2025. Of its $33.92 billion in marketable securities, only $1.2 billion are in equities, with the rest in government and corporate bonds.

Applying Hamilton Helmer’s 7 Powers framework provides further insight into Meta’s competitive position. While Meta doesn’t benefit significantly from Scale Economies in its digital products (though this could change with AR hardware production), it excels in Network Economies—one of the most difficult powers to establish. Facebook, Instagram, WhatsApp, and Messenger are valuable precisely because everyone uses them, creating a self-reinforcing ecosystem that newcomers struggle to replicate. This explains why Threads, despite being well-designed, hasn’t yet achieved the network effect that X maintains with its established user base.

Meta doesn’t currently demonstrate Counter-Positioning (being the incumbent rather than the disruptor) or significant Switching Costs (users can easily deactivate accounts). While Meta has exceptionally strong Brand recognition with Facebook and Instagram, this doesn’t translate to premium pricing for users since the platforms are free, though it may help command higher advertising rates. The company’s developing technologies in AR and MTIA chips could eventually become Cornered Resources, but they’re still in early development. Process Power advantages aren’t apparent in Meta’s operations currently.

The investment thesis is straightforward: Meta controls an immense Family of Apps with a wide moat that has remained dominant for decades, generating massive advertising revenue. This cash flow funds what could be the most significant change in human-technology interaction since the iPhone. The Orion prototype, while currently bulky, represents a vision with broader appeal than niche VR headsets like Apple’s $3,500 Vision Pro. With prudent financial management, global growth, and a clear technological vision, Meta is positioning itself at the forefront of the next computing paradigm—making it a compelling “wonderful company at a fair price” investment opportunity even at a PE of 25, with greater potential if the ratio drops to 20 or lower.

Meta Platforms, Inc. (META) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 262 hedge fund portfolios held META at the end of the fourth quarter which was 235 in the previous quarter. While we acknowledge the risk and potential of META as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.