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I’ve been looking around for ideas for my Stocks and Shares ISA and Self Invested Personal Pension (SIPP) portfolios. And some Big Tech stocks keep catching my eye, particularly Amazon, Meta Platforms (NASDAQ:META) and Microsoft.
Many tech shares have taken a beating lately. In fact, a couple look like they’ve gone a few rounds with a prime Mike Tyson!
Take Meta, for example, which has fallen 23% since August. It now has a forward price-to-earnings (P/E) ratio of 19. At first glance, that just looks too low.
I mean, it’s far cheaper than other well-known S&P 500 blue-chips such as Walmart (42), Costco (50), Caterpillar (31), Netflix (31), and even McDonald’s (23). And next to Tesla and Palantir, Meta looks like a deep-value tech stock.
So should I invest in the social media giant?
High-margin machine
As most will be aware, Meta’s the company behind Facebook, Messenger, Instagram, and WhatsApp. Between them, these platforms have an astonishing 3.58bn user worldwide. Meta also sells VR headsets and AI smart glasses.
The company is a cash machine, with most of its revenue coming from high-margin digital advertising. Meta’s gross and operating margins are 82% and 41% respectively.
Looking out to 2028 forecasts, the forward-looking P/E drops to around 15. This is the type of multiple I’d expect to see from a mature, slow-growth company. Yet Meta’s net income’s expected to top $100bn by then, up from $60.5bn last year.
Plus, there appears to be a ton of long-term growth left in the tank. For example, Meta’s now actively monetising WhatsApp by charging businesses to send users messages and facilitate chats, potentially turning the app into a major revenue generator.
It’s also introducing ads inside WhatsApp, though wisely keeping them away from users’ private inboxes to avoid annoying them.
Meanwhile, the core Facebook and Instagram ad businesses should continue growing, as AI power is enhancing targeted ads and making them more valuable. Last year, average price per ad increased 9%.
On top of this, Meta’s other big bets it’s working on that could drive big growth in future. These include AI agents, AI ‘superintelligence’, and smart glasses (which CEO Mark Zuckerberg thinks could eventually replace smartphones).
AI slop
Then again, these bets might not pay off. In 2026, Meta anticipates capital expenditures of $115bn-$135bn, with most going on its Meta Superintelligence Labs projects. It’s also started using debt to finance the AI infrastructure buildout.
Another developing risk is more countries banning kids from using social media, with Greece recently following Australia’s lead. This trend could see its Instagram and Facebook user base diminish.
Indeed, more people are associating social media with tobacco, in terms of its addictiveness. That’s not a great association from a business (and valuation) perspective. It may even face lots more litigation.
Another worry I have is the growing amount of AI-generated content (particularly AI slop) on its platforms. If users feel like they’re just interacting with fake images rather than real people, they might start spending less time on the apps.
My decision
But Meta stock looks undervalued, so investors may want to take a closer look at it. However, due to the worries I’ve outlined, I’m not going to invest. Fortunately, there are plenty of other opportunities out there right now.
