Market Correction: Why Meta Platforms Stands Out Amidst Nasdaq’s Decline

As of this moment, the Nasdaq Composite is down nearly 9% for the year and 13% from its all-time high. This downturn places the Nasdaq in correction territory, defined as a drop of 10% or more. However, it has not entered a full-blown market crash, which usually signifies a steep decline of 20% or more. A bear market refers to a prolonged period of declines of 20% or greater.

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Despite this overall drop, numerous previously high-performing stocks are experiencing even steeper declines. For instance, Meta Platforms (NASDAQ: META) has fallen 14% in just the last month.

Here’s why Meta is a high-conviction growth stock worth considering, regardless of the broader market’s descent.

Image source: Getty Images.

Meta Platforms: A Unique Player in Advertising

In times of market volatility, it’s easy to mix up price fluctuations with a company’s intrinsic value. However, a stock’s price only reflects current investor sentiment. A smarter approach is to evaluate a company’s market position and its long-term growth potential.

Meta Platforms, which operates popular apps such as Instagram, Facebook, and WhatsApp, has become a leading destination for advertisers thanks to increased user engagement, particularly on Instagram. Initially a platform for sharing photos, Instagram has shifted its focus towards short-form videos (Reels), driving user interaction and ad revenue.

Advertisers leveraging Reels can tailor their messages based on user interests, marking a shift in how Instagram is utilized as a search engine, now competing with Alphabet‘s Google. As a mobile-first interface, Instagram may present a more effective platform than YouTube, which caters primarily to desktop users.

Meta’s Performance Amid Financial Challenges

Meta has experienced impressive growth, with revenue and earnings seeing a significant rebound following declines in 2022 and 2023. Nevertheless, the company’s stock has recently faced notable setbacks.

META data by YCharts

Advertising constitutes the majority of Meta’s income, making it susceptible to economic fluctuations. Additionally, there is a perception issue to address: investors might overlook the financial impacts of Meta’s Reality Labs, which incur heavy losses each quarter due to investments in augmented and virtual reality. In 2024, for example, Meta reported a staggering $17.73 billion loss in this sector, impacting overall income by 25%.

Few companies are capable of absorbing such losses while remaining profitable. During market sell-offs, investors often scrutinize current performance over future prospects, risking a harsher assessment of Reality Labs’ financial burden.

Valuation and Long-Term Potential

Despite Meta’s cyclical results, which could spur significant declines during broader market downturns, it remains a valuable investment in times of volatility. The stock features an attractive price-to-free-cash-flow (FCF) ratio of 29.2 and a price-to-earnings (P/E) ratio of 25.3, and it trades at a discount compared to the S&P 500, which has a P/E of 27.8. Even if earnings dip in the short term, the company is well-positioned for long-term growth, making its valuation increasingly appealing.

Moreover, Meta boasts a robust balance sheet, ending 2024 with $77.81 billion in cash, cash equivalents, and marketable securities, juxtaposed with $28.83 billion in long-term debt. This results in a net cash position of around $49 billion. Rather than incurring debt for AI and Reality Labs ventures, Meta has been strategically using its FCF, which reached $52.1 billion in 2024.

This financial strength enables Meta to fund long-term investments even if FCF declines, thus allowing the company to maintain its competitive edge and potentially increase earnings growth over time.

Meta: Positioned for Future Growth

While Meta’s stock may experience fluctuations in the near term, the underlying business model remains robust. Among major tech companies, few have adapted more effectively than Meta and Nvidia, particularly with features like Instagram’s Reels transforming advertising dynamics.

Long-term investors should remain unfazed by potential short-term declines in ad revenue unless they indicate a loss of market share to better products, which is currently unsupported by evidence. Given its sustained growth prospects, Meta represents a strong investment opportunity, especially if its price remains low due to market fluctuations.

Seize a Lucrative Opportunity Today

Have you ever felt you missed your chance to invest in successful companies? If so, now may be your moment.

Occasionally, our team of analysts identifies a “Double Down” Stock recommending investments set to surge. If you believe you’ve already missed your chance, now is a prime time to buy before prices escalate. Consider the following:

• Nvidia: If you invested $1,000 when we first issued a recommendation in 2009, you’d have $282,016!
• Apple: An investment of $1,000 from our 2008 recommendation would now be $41,869!
• Netflix: Investing $1,000 based on our 2004 alert would mean $482,720 today!

Currently, we’re issuing “Double Down” alerts for three remarkable companies, and another opportunity like this may not arrive again soon.

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*Stock Advisor returns as of March 10, 2025

Randi Zuckerberg, a former executive at Facebook and sister to Meta’s CEO, serves on The Motley Fool’s board of directors. Suzanne Frey from Alphabet also holds a position on the board. Daniel Foelber has no stake in the mentioned stocks. The Motley Fool recommends and has positions in Alphabet, Meta Platforms, and Nvidia. A disclosure policy is in effect.

The views and opinions expressed herein represent those of the author and do not necessarily reflect those of Nasdaq, Inc.