Meta Platforms Looks Like a Bargain Right Now

You don't always have to dig deep in the weeds to find an undervalued growth stock. Highly visible Meta Platforms (NASDAQ: META) stock looks quite compelling after a post-earnings dip on tremendous results.

Buying the stock now may feel like buying Alphabet in early 2025, before AI catalysts fueled an incredible rally. Here's why.

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Meta Platforms' Q1 earnings were great

It's good to start with earnings since there was a mismatch between the results and how the stock performed. Revenue reached $56.3 billion, representing a 33% year-over-year increase as online ads continue to grow. That's compared to $77.3 billion in Google ad revenue. Meta Platforms is closing the online advertising gap and is growing at a faster rate than Alphabet.

Higher-than-expected AI capital expenditures ruffled some feathers, but Meta Platforms still managed to grow its net income by 61% year over year. Judging the company harshly for rising AI capital expenditures seems a bit unfair, given that its profits and margins are heading in the right direction.

Investors were also concerned about a slight sequential dip in daily active users, but that figure was still up by 4% year over year. Meta Platforms cited internet disruptions in Iran and a restriction on WhatsApp access in Russia when explaining the slight sequential decline.

Guidance implies growth will continue

Meta Platforms set $59.5 billion as the Q2 2026 midpoint in guidance, which implies 25.2% year-over-year revenue growth. That's a higher growth rate than Alphabet's typical quarter, and it shows that the company is still gaining market share in online advertising.

This isn't even just a few quarters, either. Meta Platforms has maintained a 19.9% annualized revenue growth rate over the past three years. That type of foundation, combined with AI, has contributed to the recent acceleration that looks poised to continue in Q2.

Meta Platforms is in the early stages of meaningful diversification

Meta Platforms still heavily relies on online advertising revenue, while Alphabet has diversified into Google Cloud, Gemini, Waymo, and other businesses. However, Meta Platforms is doing some diversification of its own, which doesn't appear to be priced into the stock.

CEO Mark Zuckerberg touted the company's release of its first AI model from Meta Superintelligence Labs and aims to deliver personal superintelligence to "billions of people." Meta Platforms has significant capital and profits to invest in AI models until those services become profitable.

There's nothing too exciting right now that is translating into meaningful diversification. The company generated $55.0 billion of its $56.3 billion in Q1 revenue from online ads. Reality Labs' revenue dipped year over year from $412 million to $402 million.

The "Other Revenue" segment is worth following, as it's a smaller part of the business that grew 73.5% year over year. It includes Meta Verified Subscriptions, which work similarly to X subscriptions. WhatsApp also makes extra revenue by letting businesses message customers. It's similar to platforms that let people build email lists, but in WhatsApp. Those businesses brought in $885 million in Q1.

This growth also comes with a forward P/E ratio below 20, and that combination is very hard to find in a tech stock.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.