After Earnings, Is Meta Stock a Buy, a Sell, or Fairly Valued?

"Meta reported strong fourth-quarter earnings, with sales growing 24% to USD 60 billion. Operating margins contracted 700 basis points to 41% as AI-related costs continue to mount. The firm's 2026 guidance calls for USD 125 billion in capital expenditures and USD 162 billion in operating expenses. Why it matters: Meta's ad business continues to perform at full capacity, with the firm's investments in artificial intelligence continuing to drive metrics such as engagement, ad efficacy, and content recommendation."

"Engagement metrics, including time spent on Instagram and Facebook, remain strong, with video engagement particularly strong. As users spend more time on its platform, Meta can show them more ads, driving ad impressions up 18% for the quarter. We were similarly impressed by Meta leveraging its AI investments to drive growth in ad clicks (up 3.5% for Facebook) and conversions (1% increase for Instagram). While marginal, these improvements can unlock substantial topline dollars considering Meta's scale."

Meta reported Q4 revenue of USD 60 billion, up 24%, while operating margins fell 700 basis points to 41% due to rising AI-related costs. The 2026 guidance projects USD 125 billion in capital expenditures and USD 162 billion in operating expenses. Advertising performance strengthened as engagement and video consumption rose, boosting ad impressions 18%, Facebook ad clicks 3.5%, and Instagram conversions 1%. A USD 850 fair value estimate is maintained and shares are characterized as undervalued. First-quarter sales are expected to rise 30%, 2026 sales growth is modeled at 25%, and a new large language model is expected soon.

Read at global.morningstar.com