Meta is a buy; AI-driven growth and market dominance justify 23% upside despite FCF and regulatory headwinds.

The next stock I'm going to highlight as a great buying opportunity is Meta Platforms. I calculated a fair value for this business at $72 per share with the current market price at $571.

Given that difference, I calculated an upside of 23% for Meta over the next 12 to 18 months. The outcome of the court case was less than feared with the company paying a settlement just above $10 billion, but it will be spread out over 10 years and the payments annually are not that significant compared to the cash flow from operations the business generates.

Of course, a couple of bullish factors for Meta Platforms has been increasing engagement. The company's utilizing its AI investments to make the platform more attractive, surfacing content that consumers are more interested in engaging with and that's created an increase of the number of users and the number the number of hours each user spends on the platform.

Additionally, Meta's investments in artificial intelligence are widening the gap between itself and its competitors.

Already Meta was the largest social media platform compared to Reddit, Snap, Pinterest, and X. And given the budget Meta boasts for investments in artificial intelligence, all of its competitors combined cannot boast as large a budget that Meta is allocating to its AI investments at over $125 billion estimated for 2026.

And that's a nice segue into a couple of the bearish factors for Meta Platforms. One of which is free cash flow is turning negative as the company is investing so much in AI.

And the second of which of course is regulatory as we just noticed with the court case. Meta Platforms faces several regulatory hurdles, regulatory pressure from several regulatory bodies around the world that are attacking Meta, aiming to find the company billions of dollars.

I just incorporate a multi-billion dollar cash outflow from the company almost every couple of years due to these regulatory headwinds. It's just something that the company will have to deal with going forward.

Despite those headwinds, I think it's a great opportunity. I own Meta Stock in my portfolio as well, and I'm interested in adding more.