How to Get Paid to Buy META at a Steep Discount
At about $658.76 a share, Meta Platforms (META) is trading about 16% below its 52W high.
Do you think META stock is a good long-term bet at current levels? What about at a 30% discount at about $460 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.4% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 1/15/2027, with a strike price of $460
- Collect roughly $1,965 in premium per contract (each contract represents 100 shares)
- That’s about 4.4% annualized yield on the $46,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.4%
- And you give yourself a chance to buy META stock at deep discounted price of $460
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| META stays above $460 | You keep the full $1,965 premium – 4.3% extra income over the next 357 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| META closes below $460 | You’ll be obligated to buy 100 shares at $460. But thanks to $1,965 premium, your effective cost basis is just $440.35 per share – a roughly 33% from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell META Stock or check Meta Platforms Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.
Why Hold META Stock Long-Term
Meta’s entrenched network effects and massive user base provide a durable competitive advantage. The company is at the forefront of two major secular growth trends: the ongoing shift of advertising to digital platforms and the development of the metaverse. Its strong financial position allows for aggressive investment in future growth drivers like AI and virtual reality. We are comfortable owning META for the long term, as its core business is highly profitable and its future growth prospects are substantial, even if the stock price were to decline in the short to medium term.
Competitive Advantage
We classify META’s economic moat as WIDE, with the primary source being Network Effect
- Successfully increased ad prices without significant advertiser churn, demonstrating inelastic demand.
- High advertiser switching costs due to deep integration across its ecosystem (Facebook, Instagram, Threads) and sophisticated, data-driven targeting tools that are difficult for competitors to replicate.
- Maintains a dominant market share in the digital advertising space, with Facebook and Instagram being default platforms for many businesses.
See Meta Platforms Full Analysis.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 11.0% – 15.4% (Digital Advertising), ~40%+ (Metaverse) (Source: Grand View Research, MarketResearch.com, KBV Research, Precedence Research)
Secular Trend: Digitalization of Advertising and Rise of Immersive Social Experiences
Key Risks: Regulatory pressure from antitrust and data privacy lawsuits globally, and technological disruption from competing platforms.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: Strong net cash position with minimal debt, providing significant financial flexibility for investments and shareholder returns. No discernible bankruptcy risk.
Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.
A Multi Asset Portfolio Gives You Safer Smarter Growth
Individual picks are volatile but diversified assets offset each other. A multi asset portfolio helps you stay the course capture upside and reduce downside.
The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices