History Says Now Is the Perfect Time to Buy Meta Stock

After reporting third-quarter earnings, Meta Platforms (NASDAQ: META) stock has taken a tumble. It's now down around 25% from its all-time high, and it has many investors, including myself, wondering if now is the time to buy the stock on the dip.

While there are concerns surrounding how much Meta is spending on AI infrastructure, I think this is table stakes for being a big tech company right now. Furthermore, this isn't wasted funds; these are real computing products that can also be repurposed if AI doesn't live up to its hype.

I think history supports this notion that now is a great time to buy the stock, and investors should be adding to their position whenever they have the chance, as Meta is still a strong and dominant business.

Image source: Getty Images.

Meta's spending plans overshadowed an excellent Q3

If you forget about Meta's spending plans for a moment, the quarter Meta delivered in Q3 was outstanding. Heading into the third quarter, management expected revenue to be in the range of $47.5 billion to $50.5 billion. Meta far exceeded these expectations, delivering $51.2 billion in revenue, up 26% year over year. While there are some skeptics about how artificial intelligence can boost a business like Meta Platforms, I think the proof is in the pudding.

One of the biggest areas Meta believes AI can boost its business is through its ad technology. Meta believes that integrating AI will make ad conversions more successful and allow users to use its social media platforms (like Facebook and Instagram) for longer. CEO Mark Zuckerberg noted that its AI recommendation system led to 5% more time spent on Facebook and 10% on Threads.

In a vacuum, this would have been an excellent quarter that would have been well-received by the market. But the issue was Meta's spending plans. For 2026, the company expects capital expenditure dollar growth to be notably larger than it was in 2025. Most of this money is flowing to data center construction, but just how much is Meta spending?

For 2025, it expects its capital expenditures to be between $70 billion and $72 billion. In 2024, that figure was $39.2 billion. So, if the dollar growth from 2024 to 2025 is going to be about $32 billion, then 2026's capital expenditures will easily top $100 billion. That's a huge amount of money to be spending on AI, and it has investors worried that Meta may be getting ahead of itself.

However, we've seen this from Meta before.

This isn't the first time Meta has pursued a vision

Back in 2022, Meta was spending hand over fist to build out its metaverse aspirations. While this never came to fruition, Meta eventually changed its spending practices and turned back into a cash-flow machine. I think the same thing may happen, although I expect AI to have a far more lasting impact than the metaverse did.

Regardless, I think investors should be focused on the long term, where AI could have an impact and Meta returns to generating substantial cash flow. After the sell-off, Meta's stock is trading at an attractive price.

META PE Ratio data by YCharts

Ignoring the crash during 2022 when investors lost all faith in Meta, this is at the lower end of where Meta has traded for nearly a decade. Furthermore, Meta had a one-time tax charge in Q3 that wrecked this metric. Without this one-time charge, Meta's stock would actually be valued at about 20 times earnings -- a very cheap price tag that has only been achieved a handful of times over the past few years.

From a historical standpoint, Meta is still a great stock to own; it's just going through a hefty spending phase. I think it will still be a great long-term investment, and investors should take advantage of the cheap stock price and scoop up shares now.

Keithen Drury has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.