Why Meta Stock Is Objectively Cheap at Current Levels

The last several days on the markets have been highly eventful, and the reaction of investors to the corporate reporting of the technological sector for the first quarter of 2026 turned out, perhaps, highly revealing. While indices are storming all-time highs, the shares of Meta Platforms (META) underwent a harsh revaluation downward.

The market punished the company, sending the share price downward, despite objectively strong financial indicators. But the current situation around Meta demands a cold-blooded structural analysis. If we set aside emotional reactions to the declarations of management, we will see a company whose valuation became unreasonably cheap. Especially for a technological giant vying for the AI industry throne.

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My main thesis is that inside Meta today coexist, it seems, two absolutely different entities. A healthy, generating colossal profit base business—a “cash cow”—and a technological venture, demanding gigantic infusions. At the current forward multiple P/E in the region of 20-21, the market values exclusively the first entity. At this, the premium for growth, for technological leadership, and for venture potential equals zero. There is absolutely no bubble in these shares. At current levels, selling Meta strategically is illogical—this is, most likely, a stable business, the fall of which is fundamentally limited by its own phenomenal profitability.

Analysis of the “Cash Cow” and Why There Is Nowhere to Fall

To understand why the current capitalization of $1.55 trillion is fully justified even without the account of AI breakthroughs, it is necessary, probably, to dismantle the structure of the generation of cash flows of the company. The report for the first quarter of 2026 demonstrated impressive figures. Meta's revenue grew by 33% year-over-year (YoY), having reached $56.31 billion. Albeit this is a slight decline in revenue compared to the fourth quarter of the past year ($59.9 billion), it appears to be an absolutely normal phenomenon, reflecting the standard seasonality of the advertising market. The gross margin remains at a fantastic level for such volumes—around 82%.

However, in the analysis of net profit ($26.77 billion, +61% YoY), an important nuance hides, which institutional investors read instantly. Into this figure is baked in a one-time tax benefit of approximately $8 billion. If we strip out this one-off accounting factor from the reporting, the adjusted EPS will constitute around $7.31 instead of the declared $10.44. Nevertheless, even the adjusted operational efficiency of the company remains colossal. The segment Family of Apps—Facebook, Instagram, and WhatsApp—generates almost 100% of revenue and shows stable growth.

When looking at the sales market, the company simply squeezes the maximum out of what it already has. By leveraging the implementation of algorithms of AI into advertising (instruments of the series Advantage+), Meta could increase the volume of showings by 19% and, what is still more important, raise the average price for advertising by 12%.

This is an absolutely healthy, high-margin value business. A company with a PE around 20 is challenging to name as growing. For a visible contrast, the forward P/E at Microsoft (MSFT) right now holds itself in the region of 35, and at Nvidia (NVDA) it stably stays above 40. A multiple P/E of 20 for a company controlling the attention of almost 4 billion people fully justifies the current capitalization and corresponds to the valuation of a mature industrial business and not Big Tech.

There is simply nothing to blow off here.

Why Do Investors Punish Meta?

If the basis is so solid, why are the shares under so much pressure lately? The answer hides in the second goal of the company—its attempts to not lose the technological race, which increasingly cuts into shareholders' value.

The shock of capital expenses (capex) became the main trigger of sales—kicked off by Mark Zuckerberg's forecasts. The bar for 2026 was sharply raised up to $125–145 billion. The market instantly revalued these figures. For investors, this is already not simply an investment into a promising future; this is a “tax on survival.” The market, possibly, considers that Meta is forced to burn these billions on infrastructure and chips of Nvidia simply to prevent competitors from taking a slice of its advertising market share. Investors fear that because of such aggressive spending, the operational margin of the company risks going lower than 40%.

Expenses are huge. But new products, capable of immediately paying off these expenses, for now, aren't materializing as soon as investors desire. The second powerful blow by sentiment—the apparent failure of Meta's open-source-first strategy—now has the company seemingly playing “catch up.” A radical change of strategy in the area of AI happened in April of this year. For a long time, Meta was the main beneficiary of an open-source family of models, Llama, and gathered around itself a loyal army of developers. However, the release of the closed (proprietary) model Muse Spark, apparently, means an essential correction of the initial concept. This does not mean that the platform fully closes itself. Light versions and past developments, probably, will remain an open option, but the flagship model of the company now will be proprietary.

Thus, its open-source strategy ceases to be a locomotive. And this is a big minus for the ecosystem of the company. Possibly, Meta considered that on open code it is impossible to build advanced monetization and to protect margin. But having entered onto the territory of closed models, the company found itself in the role of catching up. Now Meta is forced head-on to compete with already formed ecosystems of OpenAI and Google (GOOG) (GOOGL) and to win back market share. The purchase of a share in Scale AI for $14.3 billion and the appointment of Alexandr Wang as the main on AI only confirm the extremeness of measures.

Besides the fight for base AI, Meta continues to invest in highly competitive, long-term, capital-intensive projects, where the chances for fast leadership are minimal. In the metaverse (Reality Labs), the subdivision continues to generate a stable operational loss of over $4 billion per quarter. For the sake of fairness, the metaverse—this is a super idea, capable in perspective of creating an absolutely new world and a market of sales. But it is needed to admit: these are perspectives on a very long period, decades away from flourishing. For the foreseeable future, this division will.

The market right now values this potential exactly at zero.

In robotics, the May purchase of the startup Assured Robot Intelligence demonstrates the desire of the company to ground its AI in the physical world. However, in this field, a harsh fight already goes on with leaders like Tesla (TSLA) (Optimus) and Chinese manufacturers. Here Meta again is a newcomer in this field. And I think that, by all points, where the company can be characterized as growing, it most likely does not appear a leader, or this product yet is not ready. This is precisely why the market refuses to give the company advances and values its technological venture with a maximal discount.

Philosophy of Survival: Apple vs. Meta

But Meta goes all the same into battle. And to fully realize why Mark Zuckerberg is ready to go on radical financial sacrifices, it is necessary to compare the strategy of Meta with the approach of another giant—Apple (AAPL). This visibly demonstrates the difference between the "owner of a trading center" and the "manufacturer of content".

Many analysts fairly note that Apple did not begin, in essence, to enter into a direct arms race in the field of artificial intelligence. They yielded the primacy in the development of base models, but this made their ecosystem an ideal marketplace for third-party AI solutions. Apple can allow itself such a luxury because they control the basis—the operational system iOS and the hardware. To them, it is not obligatory for them to bake the best bread; to them, it is enough to collect a commission from those who sell it on their territory.

Meta could theoretically go by a similar path of integration of foreign solutions, but Zuckerberg chose a full-scale battle and the creation of its own technologies from zero.

Why?

Because Meta lacks its own operational system—except for niche segments of VR headsets. For the company's own strong AI technology, this is an existential question of independence. Meta remembers too well how a pair of changes in Apple's privacy policy (ATT) several years ago cost them tens of billions of dollars in revenue.

I think, therefore, Meta aggressively invests in Muse Spark for this very reason. The company's leadership understands: if there will be the best or at least a comparable-in-strength AI product, to which people will get used to, it will become absolutely unimportant to the user on exactly which device or in what operational system it is launched. In this paradigm colossal capital expenses become not a whim, but a foundation for the survival of the business in a long-term perspective.

Hidden Driver: Distribution

Now we will transition to the main trump card of Meta, which allows us to hope for the success of the company. There are three basic laws of economics—this is “to whom to sell,” "what to sell" and "how to sell". Unlike many AI startups, which create a genius technology and then agonizingly search for a market, at Meta the question "to whom to sell" is decided historically and unprecedentedly. Almost 4 billion active users are located in their ecosystem.

This generates a concept, which it is possible to call "AI for passive users".

Let us compare audiences: 200 million active users of ChatGPT (or Gemini), who use AI daily—these are, as a rule, technologically savvy people. They purposefully search for the best product, compare benchmarks, and are ready to download separate applications. But the billions of users of WhatsApp and Instagram—this is a thoroughly different audience.

An ordinary layman is often passive and simply will not go to search for the best AI, since for him this is not strongly important. They do not need an abstract artificial intelligence; what they need is convenience here and now, without extra clicks.

And let us imagine a scenario: for example, through a year, Meta seamlessly integrates an advanced version of its chatbot (of the level of 2025–2026) directly into WhatsApp or Facebook. For the user, this will be a real explosion. They do not need to transition anywhere—the artificial intelligence, capable of booking a ticket, translating a text, or composing a meal plan, already is located in their favorite messenger.

Even if this built-in bot will be technologically a step behind flagship models from Google, it unconditionally will win thanks to a zero threshold of entry. In the economics of attention, distribution has a considerable meaning.

And this process of monetization is already launched. In the report for the first quarter of 2026, there is an unnoticeable line, "Other Revenue", which flew up by 74% (to $885 million). These are "brooks" of new money—income from paid business messages in WhatsApp. Gradually, the messenger is turning into a powerful B2B interface. Besides that, Meta has already begun to test the model of subscriptions (Freemium), where for advanced functions of AI, users will pay those same conditional $20 in a month. Given its multi-billion reach, a conversion even in fractions of a percent will create a multi-billion stream of net income, the margin of which will roll over the scale.

Conclusion: Free Option on Technological Leadership

Summing up the outcomes, it is necessary, perhaps, to dip one's toes into META stock today—this is not an easy walk. The company stepped into an epoch of a heavy positional war for artificial intelligence, where it is attempting to bite off market share from the strongest competitors and playing catch-up. The transition from open models to closed, attempts to enter into the overheated market of robotics, and the uncertain future of the metaverse—all this carries in itself obvious risks.

However, Meta's huge capital expenses are a double-edged sword. Yes, they press on the current margin, but on the horizon of several years, these investments inevitably will lead to an alignment of computing capacities. If Meta spends on infrastructure and R&D as much as Microsoft or Google, the quality of their AI models should pull ahead and at least equal their competitors.

The bottom line is that the current financial indicators of Meta Platforms look like those of a classic mature company. A forward P/E around 20 is fully justified by the fundamental business, and for this reason, the share price, in essence, has nowhere to rapidly fall—the current price is objectively fair.

There is no bubble here, it seems.

At the market values right now, the technological venture of the company is exactly at zero, excluding any premium for growth. This part of the business goes exclusively as a bonus option. But despite the status of the catching up in many areas, weighty chances remain at Meta to reach success in the race for AI thanks to gigantic capital infusions and a huge base of users. And if these products will shoot, the company will be able again to transition into the rank of the growing, which will trigger a multiple expansion.

Therefore, in the current valuation of Meta, there is a strong industrial basis and an unaccounted-for market hope for technological leadership.

On the date of publication, Mikhail Fedorov did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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