META Down 19% From 52-Week High: What Awaits the Stock in 2026?

Core Insights - Meta Platforms' shares have declined approximately 19.1% from their 52-week high, underperforming the broader technology sector [1] - The company is heavily investing in AI, with capital expenditures expected to rise significantly in 2025 and 2026, which may enhance long-term growth prospects [2][6] - Despite the potential for long-term benefits from AI investments, short-term challenges include a difficult macroeconomic environment and increased competition in the advertising market [3][18] Financial Performance - META shares have returned only 3.2% over the past 12 months, compared to a 20.4% increase in the Zacks Computer & Technology sector [1] - The Zacks Consensus Estimate for fourth-quarter 2025 earnings is $8.15 per share, reflecting a slight decrease from previous estimates [12] - For 2025, total revenue is projected to be between $198.75 billion, indicating a 20.8% growth from 2024 [14] Capital Expenditure and AI Investment - Meta's capital spending for 2025 is expected to be between $70 billion and $72 billion, with further growth anticipated in 2026 [2][6] - The company and its peers are projected to spend around $380 billion on AI infrastructure in 2025 [2] - AI integration is expected to enhance user engagement and advertising effectiveness, with an annual run rate for AI-powered ad tools exceeding $60 billion [8][10] Competitive Landscape - META is facing stiff competition in the advertising market from companies like Alphabet, Amazon, and TikTok, which may impact its share price [3][18] - In the past year, META shares have outperformed Snap and Amazon but lagged behind Alphabet, which saw a 57.2% appreciation [7] Valuation - META shares are considered overvalued, trading at a forward price/sales ratio of 7X, compared to industry peers [15] - The company currently holds a Zacks Rank 3 (Hold), suggesting that investors should wait for a more favorable entry point [19]