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

"Meta reported strong fourth-quarter earnings, with sales growing 24% to $60 billion. Operating margins contracted 700 basis points to 41% as AI-related costs continue to mount. The firm's 2026 guidance calls for $125 billion in capital expenditures and $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 posted 24% year-over-year fourth-quarter sales growth to $60 billion while operating margins fell 700 basis points to 41% due to rising AI-related costs. The company guided for $125 billion in 2026 capital expenditures and $162 billion in operating expenses, raising forward spending expectations. Ad engagement remains strong across Facebook and Instagram, particularly video, leading to an 18% rise in ad impressions and modest increases in ad clicks and conversions. A $850 fair value estimate is maintained and shares are considered undervalued given scale and AI-driven ad improvements. Meta expects first-quarter sales growth around 30% and models 2026 sales growth at 25%.

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