Activist ValueAct is poised to trim fat and help boost profits at Meta Platforms. Here's how

Company Overview - Meta Platforms builds technologies that facilitate community connections and business growth through various products, including mobile devices, personal computers, virtual reality headsets, wearables, and in-home devices [1] - The company operates through two segments: Family of Apps (FoA) and Reality Labs (RL), with FoA encompassing Facebook, Instagram, Messenger, and WhatsApp, while RL focuses on augmented and virtual reality-related consumer hardware, software, and content [1][3] Investment Engagement - ValueAct has taken a significant position in Meta, investing approximately $1 billion, capitalizing on the stock's volatility, which has seen prices fluctuate between below$400 and above $600 per share [3] - The stock price has increased by about 56$30 in EPS by 2026, with a 20-times multiple suggesting a share price of approximately $600 [4] - The EPS breakdown indicates$40 from the FoA segment and -$10 from the RL segment, leading to a valuation of$800 per share for FoA and a $400 billion negative impact from RL [4] AI and Growth Potential - AI spending is viewed as a potential value creator for Meta's core FoA business, with applications in consumer internet and matchmaking business models [4] - Meta's open-sourcing of the "LLaMA" AI model is expected to enhance its role in the AI ecosystem and justify its AI expenditures [4] ValueAct's Strategy - ValueAct has a strong track record of creating value in controlled companies, averaging a return of 124.12% compared to a 30.79% market benchmark [6] - The firm is expected to leverage its experience to help Meta trim inefficiencies in the RL division while maximizing AI investments [4][6]