• Meta Platforms (FB) is off 38% year-to-date, although this is better than its -46% trough.
• There is no question that ByteDance’s TikTok is taking away market share from Facebook, but FB stock largely reflects this drop.
• Expect to see Q1 financials which, although profitable, reflect year-over-year declines in metrics, possibly pushing FB lower and creating an opportunity for value investors.

Meta Platforms (FB) has had a rough time lately. FB stock has fallen from $336.35 on Dec. 31 to about $214 as of midday March 23. At one point, the stock fell to $186.63 as of March 14.

The market is scared about Facebook apparently losing market share to TikTok. However, although it could take another hit, FB stock is close to value territory.

Where Things Stand with FB Stock

I wrote earlier this month that Facebook lost less than 0.05% of its daily average users (DAUs). The company’s DAUs fell ever so slightly from 1.93 billion in Q3 to 1.929 billion.

That means its DAUs fell by 1 million. The market is scared this figure could start to fall off of a cliff, so it took the stock down by 38%.

In fact, on March 22, Buzzfeed (NASDAQ:BZFD), which relies heavily on revenue generated from Facebooks ads, addressed this issue. Its management talked at length about lower Facebook revenue.

CNBC said this was a “continuing theme in tech: consumers are moving away from Meta’s Facebook.”

Buzzfeed CFO Felicia DellaFortuna noted: “…the shift in audience time away from Facebook has disproportionately impacted our commerce revenues relative to other businesses.”  She also said: “…we continue to see audiences spending less time on Facebook.”

But she also said this: “Instagram and TikTok are also significant platforms for us in terms of audience engagement … young people continue to spend more time on emerging platforms such as Instagram and TikTok.” In fact, when she talked about the shift to TikTok, she also often mentioned Instagram, which is owned by and earns ad revenue that accrues to Meta Platforms.

So Meta is picking up users that are dropping viewing time on Facebook. They are moving to Instagram and BuzzFeed’s short-form video platform called Tasty, even though some traffic is also going to TikTok.

Therefore, don’t expect revenue at Meta to completely fall off a cliff as the market fears.

Meta’s Powerful Free Cash Flow

Last quarter, Meta Platforms made $12.56 billion in free cash flow (FCF). This was an FCF margin of 37.3%. Analysts forecast revenue will rise to $132 billion in 2022 and $155 billion in 2023. The latter is up 31.5% from 2021 revenue of $117.9 billion.

That implies FCF could hit $58 billion by 2023. That is because if we take 37.3% of $155 billion, the FCF margin implies FCF will reach $57.8 billion. But to be conservative, let’s say that margin floats down to 35%. That would lower FCF to $54.25 billion.

Next, let’s assume the market values FB stock with a 5% FCF yield. That is the same as a price-to-FCF (P/FCF) multiple of 20x (i.e., 1 divided by 0.05 = 20.) That means if we multiply $54.25 billion by 20, the market capitalization will be $1.085 trillion. That is more than 91% higher than Meta’s present $567 billion market cap.

In other words, FB stock is still worth 1.9135 times $213.46, its price as of March 23, or $408.46. That shows potential upside in Meta shares.

What to Do With FB Stock

The problem is FB stock might not be on a straight path to this price. For example, after the upcoming earnings report, there could be another leg down.

The reason is investors might be alarmed if quarterly DAUs are lower than last year again, even if they are small moves. That does not mean FCF will be lower. I suspect it will continue to grow. But the market may ignore this.

So, look for some interesting buying opportunities over the next three months. You know the implied value is much higher, but the market might not care. That is where value investors shine. They know how to be patient and accumulate value stocks when they go on sale.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.