Image source: Meta Platforms
Meta (NASDAQ: META) stock has experienced a sharp fall. In the space of around a month, it has fallen from $780 to $643 – a drop of roughly 18%.
Could there be an opportunity here for investors? Let’s take a look at the set-up.
There are plenty of things to like about Meta from an investment perspective, in my view. For a start, the company’s still growing at a rapid rate. For the third quarter of 2026, revenue came in at $64.6bn, up 26% year on year. For the year, analysts expect revenue to hit $256bn versus $201bn in 2025.
Second, the company’s having a ton of success with AI. In recent years, Meta has used the technology across its social media platforms to serve up more relevant ads to customers and this has boosted its growth.
More recently, it launched Muse, an AI personal assistant tool. This surpassed 10m downloads in its first 40 days.
Nobody uses AI better than Meta.
Nvidia CEO Jensen Huang
Third, the stock looks reasonably valued right now. With analysts expecting earnings per share of $29.80 for 2026, the price-to-earnings (P/E) ratio is only 21.6, meaning that we have a ‘growth at a reasonable price’ set-up.
One other thing to like from an investment perspective is that unlike other Big Tech businesses, such as Apple, Alphabet, and Amazon, the company’s still led by founder Mark Zuckerberg. He’s very much running the business with a founder’s mentality.
The bear case
So that’s the bull case. Now, let’s examine the bear case. One negative to be aware of here is that Meta’s throwing a ton of money at developing AI. As a result, free cash flow has since turned negative (-$2.1bn in Q3).
Source: Charlie Bilello Creative Planning
This is spooking investors. Recently, prices for the company’s five-year credit default swaps (which insure against a default on its debt) reached all-time highs.
Another issue is that the company’s constantly the target of litigation. Last week, for example, it was sued by Rhode Island for scam advertising.
I’d expect this to continue. While Meta argues its platforms are designed to be safe and supportive, they have some major flaws and these are increasingly coming into focus.
In terms of the Muse personal AI agents, a risk here is that this product could end up costing the company a lot of money due to AI compute costs. Another is that the likes of Google and Microsoft will probably launch similar products (OpenAI already has one).
Turning to its smart glasses, there’s a pushback here right now due to privacy concerns. This could hit sentiment towards the stock.
My view
Personally, I won’t be investing in Meta. While it has many of the things I look for in a stock — top-line growth and a founder CEO — I’m turned off by lack of platform governance and the ethical issues.
If investors can get past these issues however, the stock could definitely be worth considering. After all, it has always rebounded from previous pullbacks.
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Edward Sheldon owns shares in Apple, Amazon, Alphabet, Nvidia, and Microsoft.
This story originally appeared on Motley Fool
