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

Meta Platforms is set to release its third-quarter 2025 earnings report on Oct. 29. Here’s Morningstar’s take on what to look for in Meta’s earnings and the outlook for Meta stock.

Key Morningstar Metrics for Meta Platforms

• Fair Value Estimate: $850.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

Meta Earnings Release Date

• Wednesday, Oct. 29, after the close of trading

What to Watch for in Meta Platforms’ Q3 Earnings

• AI-driven ad revenue improvements will be the key driver for the stock.
• The firm has new inventory (WhatsApp statuses, Threads) for ads, and increasing ad loads on popular apps like Instagram should help support double-digit growth.
• The bigger concern for investors may be the capital expenditure commentary for 2026, as it is slated to grow aggressively. Unlike Amazon, Microsoft, and Alphabet, Meta does not have a cloud division to directly monetize its AI investments, and investors are increasingly concerned around the firm’s AI strategy.

Fair Value Estimate for Meta Platforms Stock

With its 3-star rating, we believe Meta’s stock is fairly valued compared with our long-term fair value estimate of $850 per share, which implies a 2025 adjusted price/earnings multiple of 31 times and an enterprise value/adjusted EBITDA multiple of 16 times. We forecast Meta’s sales growing at a 14% compound annual growth rate for the next five years, spearheaded primarily by an increase in average revenue per user, with user growth also chipping in.

Read more about Meta Platforms’ fair value estimate.

Economic Moat Rating

We believe Meta merits a wide economic moat rating due to the firm’s intangible assets and the potent network effect around its Family of Apps business. While the firm’s Reality Labs segment continues to hemorrhage cash, we believe Meta’s FoA business’ strong competitive advantages will likely allow the firm to generate returns in excess of its cost of capital over the next two decades.

Read more about Meta Platforms’ economic moat.

Financial Strength

We view Meta’s financial position as rock-solid. The firm closed out fiscal 2024 with cash and cash equivalents of $78 billion, more than offsetting its debt balance of $29 billion. While the firm’s investments in AI stand to increase its capital expenditure considerably over the next few years, the firm’s advertising business remains a cash-generating machine, churning out tens of billions of dollars of free cash flow on an annual cadence.

Read more about Meta Platforms’ financial strength.

Risk and Uncertainty

We assign Meta an Uncertainty Rating of High. We believe its investments in unprofitable ventures such as generative AI and Reality Labs add a layer of uncertainty around its business, even as its large and stable advertising business continues to generate substantial cash flows in our forecast.

Read more about Meta Platforms’ risk and uncertainty.

META Bulls Say

• Meta’s core advertising business has benefited greatly through improved ad targeting and content recommendation algorithms, as well as a secular increase in digital advertising spending.
• Meta’s scale, with the majority of the world’s internet-connected users accessing its applications, allows it access to high-quality user data which it can package and sell to advertisers.
• The firm has an opportunity to drive more ad inventory growth, leveraging new products such as Threads while also improving its monetization of ads on more nascent features such as Stories and Reels.

META Bears Say

• Meta’s investments in Reality Labs and generative AI stand to lose the firm billions annually, taking some of the shine off its overall business.
• The firm has a monopoly case against it in the US which could potentially force it to break up, severing some of the scale advantages it has built up over time.
• Meta has disproportionately benefited from increased ad spending by Chinese retailers including Temu and Shein. A slowdown in spending by these firms could hit Meta’s growth.

This article was compiled by Frank Lee.