The turnaround of Meta, formerly known as Facebook, has been nothing short of impressive. After reporting second-quarter results and guidance that surpassed expectations, the company gained significant momentum. This can be attributed to the recovery in the ads market and its industry-leading AI-based targeting capabilities.

With an impressive 11% growth and a 441 basis point expansion in its adjusted operating margin, Meta showcased its resilience and potential for further growth. CEO Mark Zuckerberg and CFO Susan Li have been emphasizing the company's focus on Reality Labs, despite its staggering $40 billion in cumulative losses.

Now, let's dive into the financial overview. In the second quarter, Meta reported consolidated revenues of $32.0 billion, with its Family of Apps revenue growing to $31.7 billion, reflecting an 11.8% increase. However, Reality Labs revenues declined by 39% to $276 million, which is indicative of its ongoing struggles.

Reality Labs continues to be a significant burden on Meta's finances, reporting an operating loss of $3.7 billion. This means that for every dollar of revenue generated by Reality Labs, the segment loses an astonishing $13.50. Despite this, the company seems committed to investing heavily in R&D for the long-term potential of the Metaverse and other innovative technologies.

Looking at Meta's overall performance, it achieved a consolidated operating margin of 29%, which can improve significantly in the future, especially if Reality Labs' losses are minimized.

In terms of user engagement, Meta boasts an impressive daily active user base of 3.07 billion across all its applications, including Facebook, Instagram, Threads, WhatsApp, and Messenger. The company has been successful in monetizing its Reels feature, with an annual run-rate exceeding $10 billion, a significant jump from $3 billion just last fall.

Now, let's delve into the quantification of the Reality Labs burden. Over the past three years, Reality Labs has accumulated operating losses of almost $30 billion, reaching a cumulative loss of around $40 billion. This raises concerns about its value and whether it can ever recover from these losses.

Despite the challenges posed by Reality Labs, Meta's core social media business is thriving. The company is expected to achieve revenue growth at a 7.1% compound annual growth rate between 2023 and 2030. The improvement in monetization and growth in WhatsApp businesses and the ad market will drive this growth. While Meta's margins may not reach historical levels due to market changes and ongoing investments, they are projected to improve incrementally up to 49.5% in 2030.

Considering these projections and a weighted average cost of capital (WACC) of 8.3%, the estimated fair value of Meta's stock is $427 per share, representing a significant upside compared to its current market price.

Despite the challenges posed by Reality Labs, Meta's core businesses are performing exceptionally well, and the company seems poised for continued growth. While the Metaverse remains a long-term vision, there is still a lot of potential for upside in the company's stock.