Meta: Hold Rating Amid Regulatory and Cost Pressures

Initiate on META at Hold; $636 PT. Meta Platforms, Inc. owns the world's largest family of social

and messaging platforms (Facebook, Instagram, Messenger, and WhatsApp), used by billions globally, with an inflection point to hardware (AR/VR) on the horizon. Today, the digital landscape is in perhaps the most regulatory, political, and economic upheaval in history. Meta is thus in a unique and scary position: trying to find an increasingly narrow path to sustained earnings power. While steady engagement and a powerful ad infrastructure should provide a floor for the Family of Apps, that floor is now under structural siege. Thus, our 6% below-Street FY26E EPS ($26.50) incorporates our purposeful understanding of the European Data Markets Act impact ($2.3B in 2H25 revenue), even before factoring in ongoing pressure from the relentless $4B+/quarter Reality Labs losses and cost inflation over capex and depreciation. Fortunately, we see some cost resistance (management retains the ability to flex expenses). But against the gravitational forces of HSD opex growth and the mother of all moonshots, cost discipline only goes so far. Despite the longevity of WhatsApp and its monetization runway, and ~50% Foa margins, we pay just 24.0x. That's still a premium to the sector, but well off historical highs. Competitive encroachment and large insider selling continue to weigh on investor appetite and the discipline of market valuation. EU compliance and ad volatility are potential sources of variability on the downside. But here, the bigger risk is that