We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Meta Platforms is Overvalued at 6.01X PS: Buy or Hold the Stock?
Read MoreHide Full Article
Key Takeaways
META shares fell 6.7% YTD, lagging the sector but outperforming Microsoft and Amazon.
META plans up to $135B in 2026 capex, with rising costs expected to pressure cash flow and margins.
META's AI integration is boosting engagement and ads across platforms, supporting long-term growth.
Meta Platforms (META - Free Report) shares are trading at a premium, as suggested by the Value Score of C. In terms of the forward 12-month price/sales, META is trading at a premium of 6.01X, higher than the Zacks Internet Software industry’s 3.91X and Amazon’s (AMZN - Free Report) 2.73X. However, Meta Platforms’ shares are trading at a discount compared with Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) , shares of which are trading at 8.83X and 8.06X, respectively.
META Stock’s Valuation
Image Source: Zacks Investment Research
So, is the Meta Platforms stock a buy or hold at this level? Let’s find out.
META Drops 7% Year to Date: What’s Plaguing the Stock?
Meta Platforms shares have dropped 6.7% year-to-date (YTD), underperforming the broader Zacks Computer & Technology sector’s fall of 2.9% and Alphabet’s decline of 1.7%. However, META shares have outperformed Microsoft and Amazon, shares of which have dropped 9.1% and 19% over the same time frame, respectively.
META Stock’s YTD Performance
Image Source: Zacks Investment Research
Meta Platforms is spending heavily on AI research, models and infrastructure. The company now expects 2026 capital spending between $115 billion and $135 billion. Per CNBC, Alphabet, Meta Platforms, Amazon and Microsoft on a combined basis are expected to spend roughly $700 billion on developing AI infrastructure in 2026. Although these investments are expected to boost META’s prospects over the long term, a challenging macroeconomic environment, regulatory issues (in the European Union and the United States) and stiff competition in the ad market from the likes of Alphabet, Amazon, Snap and TikTok, among others, is expected to remain an overhang on the shares. Higher capital spending is also expected to squeeze free cash flow.
META is expected to suffer from higher operating expenses. For 2026, META anticipates total expenses between $162 billion and $169 billion, driven by higher infrastructure costs, which include third-party cloud spend, higher depreciation, and higher infrastructure operating expenses. Higher employee compensation driven by hires in the AI space is expected to drive expenses.
META’s AI Integration Boosts User & Advertiser Engagements
META’s focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user as well as advertising engagements. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.58 billion daily users, including 2 billion daily actives each on Facebook and WhatsApp. Time spent across platforms is expected to benefit from Meta Platforms’ continuous ranking optimizations.
AI recommendations that deliver higher quality and more relevant content are expected to drive engagement. The company is using Meta AI to boost user experience. In the fourth quarter of 2025, within Meta AI, the number of daily actives generating media tripled year over year. The company expects to advance the capabilities of META’s underlying media generation models and ship new features to further enhance the product experience in 2026. Focus on expanding personalization on Meta AI is expected to help the company understand user interests and preferences, as well as identify the most relevant content across the META platform. The company has started testing Meta AI business assistant with advertisers, which helps with tasks like campaign optimization and account support.
Beyond improvements to its recommendation systems, Meta Platforms expects to use the models developed by Meta Superintelligence Labs to deliver compelling and differentiated AI products. The ad business is benefiting from an improved AI ranking system. The company has a strong pipeline of ad supply opportunities on both Threads and WhatsApp Status over the long term. Ads are now running globally in Feed on Threads, and META plans to optimize the ad formats and performance before increasing supply. The company has extended its Andromeda ads retrieval engine so it can now run on NVIDIA, AMD and MTIA.
The latest multi-year deal with NVIDIA will support META’s build-out of data centers optimized for AI training and inference, as well as its core business. The NVDA deal supports META’s AI-related endeavors. The company is also adopting NVIDIA Confidential Computing for WhatsApp private messaging and the NVIDIA Spectrum-X Ethernet networking platform across its infrastructure footprint.
Q1’26 Earnings Estimate Revisions Positive for META
The Zacks Consensus Estimate for the first quarter of 2026 earnings is pegged at $6.67 per share, up 3.3% over the past 60 days, suggesting modest 3.7% growth from the figure reported in 2025.
Meta Platforms expects total revenues between $53.5 billion and $56.5 billion for the first quarter of 2026, including 4% tailwind from favorable forex.
The consensus mark for first-quarter 2026 revenues is pegged at $55.34 billion, suggesting 30.8% growth from the figure reported in the year-ago quarter.
Conclusion
Meta Platforms is spending heavily on expanding AI infrastructure, which is expected to squeeze free cash flow. Higher operating expenses are expected to hurt earnings prospects in the near term. This, along with stiff competition in the ad market and a stretched valuation, is a headwind for prospective investors.
However, META’s improved recommendation system is driving up user engagement. AI usage is making the company a popular name among advertisers. This bodes well for investors already holding the stock.
View the Zacks #1 Rank List
Image: Bigstock
Meta Platforms is Overvalued at 6.01X PS: Buy or Hold the Stock?
Key Takeaways
Meta Platforms (META - Free Report) shares are trading at a premium, as suggested by the Value Score of C. In terms of the forward 12-month price/sales, META is trading at a premium of 6.01X, higher than the Zacks Internet Software industry’s 3.91X and Amazon’s (AMZN - Free Report) 2.73X. However, Meta Platforms’ shares are trading at a discount compared with Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) , shares of which are trading at 8.83X and 8.06X, respectively.
META Stock’s Valuation
Image Source: Zacks Investment Research
So, is the Meta Platforms stock a buy or hold at this level? Let’s find out.
META Drops 7% Year to Date: What’s Plaguing the Stock?
Meta Platforms shares have dropped 6.7% year-to-date (YTD), underperforming the broader Zacks Computer & Technology sector’s fall of 2.9% and Alphabet’s decline of 1.7%. However, META shares have outperformed Microsoft and Amazon, shares of which have dropped 9.1% and 19% over the same time frame, respectively.
META Stock’s YTD Performance
Image Source: Zacks Investment Research
Meta Platforms is spending heavily on AI research, models and infrastructure. The company now expects 2026 capital spending between $115 billion and $135 billion. Per CNBC, Alphabet, Meta Platforms, Amazon and Microsoft on a combined basis are expected to spend roughly $700 billion on developing AI infrastructure in 2026. Although these investments are expected to boost META’s prospects over the long term, a challenging macroeconomic environment, regulatory issues (in the European Union and the United States) and stiff competition in the ad market from the likes of Alphabet, Amazon, Snap and TikTok, among others, is expected to remain an overhang on the shares. Higher capital spending is also expected to squeeze free cash flow.
META is expected to suffer from higher operating expenses. For 2026, META anticipates total expenses between $162 billion and $169 billion, driven by higher infrastructure costs, which include third-party cloud spend, higher depreciation, and higher infrastructure operating expenses. Higher employee compensation driven by hires in the AI space is expected to drive expenses.
META’s AI Integration Boosts User & Advertiser Engagements
META’s focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user as well as advertising engagements. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.58 billion daily users, including 2 billion daily actives each on Facebook and WhatsApp. Time spent across platforms is expected to benefit from Meta Platforms’ continuous ranking optimizations.
AI recommendations that deliver higher quality and more relevant content are expected to drive engagement. The company is using Meta AI to boost user experience. In the fourth quarter of 2025, within Meta AI, the number of daily actives generating media tripled year over year. The company expects to advance the capabilities of META’s underlying media generation models and ship new features to further enhance the product experience in 2026. Focus on expanding personalization on Meta AI is expected to help the company understand user interests and preferences, as well as identify the most relevant content across the META platform. The company has started testing Meta AI business assistant with advertisers, which helps with tasks like campaign optimization and account support.
Beyond improvements to its recommendation systems, Meta Platforms expects to use the models developed by Meta Superintelligence Labs to deliver compelling and differentiated AI products. The ad business is benefiting from an improved AI ranking system. The company has a strong pipeline of ad supply opportunities on both Threads and WhatsApp Status over the long term. Ads are now running globally in Feed on Threads, and META plans to optimize the ad formats and performance before increasing supply. The company has extended its Andromeda ads retrieval engine so it can now run on NVIDIA, AMD and MTIA.
The latest multi-year deal with NVIDIA will support META’s build-out of data centers optimized for AI training and inference, as well as its core business. The NVDA deal supports META’s AI-related endeavors. The company is also adopting NVIDIA Confidential Computing for WhatsApp private messaging and the NVIDIA Spectrum-X Ethernet networking platform across its infrastructure footprint.
Q1’26 Earnings Estimate Revisions Positive for META
The Zacks Consensus Estimate for the first quarter of 2026 earnings is pegged at $6.67 per share, up 3.3% over the past 60 days, suggesting modest 3.7% growth from the figure reported in 2025.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Meta Platforms expects total revenues between $53.5 billion and $56.5 billion for the first quarter of 2026, including 4% tailwind from favorable forex.
The consensus mark for first-quarter 2026 revenues is pegged at $55.34 billion, suggesting 30.8% growth from the figure reported in the year-ago quarter.
Conclusion
Meta Platforms is spending heavily on expanding AI infrastructure, which is expected to squeeze free cash flow. Higher operating expenses are expected to hurt earnings prospects in the near term. This, along with stiff competition in the ad market and a stretched valuation, is a headwind for prospective investors.
However, META’s improved recommendation system is driving up user engagement. AI usage is making the company a popular name among advertisers. This bodes well for investors already holding the stock.
META currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.