Investing in Meta: A Comparatively Stronger Opportunity than Google
Question: Why choose to invest in Meta Stock (NASDAQ: META) at 23 times earnings compared to Google Stock (NASDAQ: GOOG), which is priced at a lower multiple of 20? Here are some key points to consider:
- Growth: Meta’s revenue growth exceeds 20% over the past twelve months, whereas Google’s revenue growth is approximately 14%.
- Margins: Meta maintains profit margins above 42%, allowing a larger portion of revenue growth to convert into profits for shareholders. Google, on the other hand, operates with a lower operating margin of around 32%. As a result, Google translates a smaller percentage of its revenue growth into actual profit compared to Meta.
- Tariffs: Both companies face similar vulnerabilities due to their reliance on digital advertising revenue. Increasing tariffs and slowing economic growth typically prompt advertisers to cut spending, impacting both firms. Their dependence on advertising dollars means they encounter similar challenges amid rising trade barriers and decelerating economic activity.
Is META A Safe Bet?
Some investors may see Meta as a “safe haven,” but its historical performance during market disruptions raises questions. For instance, during the inflation shock in 2022, META fell over 75%. Similarly, amid the uncertainties of 2020’s pandemic, the Stock declined about 35%. Thus, META Stock does not perfectly fit the label of a “safe Stock.” Our analysis in “How Low Can Stocks Go During A Market Crash” underscores how various key stocks reacted during previous market crashes.
It’s worth noting that META has already undergone a significant correction, dropping from a high near $740 in February this year to approximately $500 now. For those looking for more stable, high-performing alternatives, consider the Trefis High-Quality portfolio, which has delivered over 75% returns since its inception, according to its performance metrics.
Image by Viralyft from Pixabay
META’s Advantage in the AI Landscape
For investors optimistic about AI’s growth potential, regardless of tariffs, Meta Platforms presents a strong case. Meta does not only develop AI technology; it also deploys it across its vast user base. This unique position enables Meta to monetize AI advancements through improved advertising, enhanced content recommendations, and superior user experiences. With substantial investments in AI research and access to the world’s largest social media platform, Meta is poised to benefit from AI developments no matter which specific technology leads the market.
Understanding Potential Risks
Despite its advantages, investing in Meta comes with risks. A primary concern is whether Meta’s earnings will meet expectations, particularly if growth diminishes from 20% to around 15% shortly. This potential slowdown correlates with a cautious economic environment, where businesses may prioritize cash preservation and reduce advertising spending. Additionally, unforeseen events could adversely impact the Stock’s performance. Investors should brace themselves for possible declines up to 40%. It’s essential to recognize that selling during such downturns could severely hinder long-term gains.
Adopting a Long-Term View
Even with these possible challenges, investors with a 3-5 year horizon who are comfortable with market fluctuations may find Meta’s current pricing an attractive entry point, especially given its role in the emerging AI market. For those interested in strategies to navigate downturns and potentially benefit from them, options like the Trefis Reinforced Value (RV) Portfolio could provide advantages. This portfolio has consistently outperformed its all-cap stocks benchmark, which combines the S&P 500, S&P mid-cap, and Russell 2000 indices, generating strong returns for investors. Consulting a financial advisor experienced in bear markets may also be advantageous. Maintaining a calm, strategic approach during volatility can yield significant wealth over time.
| Returns | Apr 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| META Return | -11% | -13% | 346% |
| GOOG Return | -6% | -23% | 282% |
| S&P 500 Return | -11% | -15% | 123% |
| Trefis Reinforced Value Portfolio | -9% | -17% | 496% |
[1] Returns as of 4/9/2025
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
