Why Meta Stock Is the Smarter Buy Than Google
Question: Why invest in Meta stock (NASDAQ: META) at 23 times earnings when Google stock (NASDAQ: GOOG) is available at a lower multiple of 20? Actually, you would, especially when you consider these simple facts:
- Growth: Meta’s revenue is growing at a faster rate, over 20% in the last twelve months, while Google’s revenue growth is around 14%.
- Margins: Meta’s profit margins exceed 42%, meaning a larger portion of their revenue growth directly translates into profits for shareholders. In contrast, Google operates with around a 32% operating margin. Therefore, even with revenue growth, a smaller percentage of that growth becomes actual profit for Google compared to Meta.
- Tariffs: Both seem comparable. Meta and Alphabet share vulnerability to economic headwinds due to their heavy reliance on digital advertising revenue. In a scenario of increasing tariffs and slowing growth, advertisers typically reduce spending, directly impacting both tech giants’ bottom lines. Their common dependence on advertising dollars means they face nearly identical challenges when trade barriers rise and economic activity decelerates.
Is META A Safe Bet?
While the term “safe haven” might come to mind for some, Meta’s past performance during market shocks suggests otherwise. For context, here’s how Meta has behaved in past shocks. During the 2022 inflation shock, META dropped over 75%. In 2020, amid pandemic uncertainty, the stock fell around 35%. So, META stock is not exactly a “safe stock.” Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
However, it’s important to note that META stock has already experienced a significant correction, falling from a high of close to $740 in February this year to around $500 now. For investors seeking a potentially more stable and high-performing alternative, consider the Trefis High Quality portfolio. This strategy has outperformed the market with over 75% returns since its inception, as demonstrated by its HQ performance metrics.
Image by Viralyft from Pixabay
META Is Uniquely Positioned to Capitalize on the AI Revolution
If you believe in AI’s long-term growth regardless of tariffs, Meta Platforms presents a compelling investment case. Unlike pure technology providers, Meta both develops AI and immediately deploys it across its billions of users. This dual position allows Meta to monetize AI innovations directly through enhanced advertising, content recommendations, and user experiences. With massive investments in AI research and the world’s largest social media ecosystem for implementation, Meta stands to benefit from AI advances regardless of which specific AI technology ultimately dominates.
Potential Risks to Consider
Despite its strengths, investing in Meta carries inherent risks. A key concern is that Meta’s earnings might disappoint, or its growth could slow from the current 20% to around 15% in the near future. This potential deceleration is linked to the current economic climate, where companies are likely to prioritize cash conservation and reduce their advertising expenditures. Furthermore, the possibility of unforeseen and currently unimaginable events also poses a risk to the stock’s performance. Consequently, investors should be prepared for a potential significant downside, which could be as large as 40%. It’s important to remember that selling during such a decline would likely be detrimental to long-term returns.
Long-Term Perspective
Despite these potential challenges, for long-term investors with a 3-5 year horizon who are comfortable with volatility, Meta at its current levels could represent an interesting entry point into the burgeoning AI market. For those seeking strategies to navigate market downturns and potentially capitalize on them, exploring options like the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors, or consulting a financial advisor with experience in bear markets could be beneficial. Remember, significant wealth can be generated in the market by those who maintain a calm and strategic approach during periods of volatility.
| 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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