Meta Plans What Amounts to a 2-for-1 Stock Split. Is the Stock a Buy?

Meta Platforms (NASDAQ:META) gave investors two things to absorb on Oct. 21. Its third-quarter revenue grew 26% year over year to $64.6 billion, above the top of management's guidance. And the social media giant plans to hand shareholders one new non-voting Class C share for every Class A and Class B share they hold, which it expects to act like a 2-for-1 stock split.

Earlier this month, I argued for buying the stock before the report, if revenue landed in the top half of the range management had guided for ($61 billion to $64 billion). It cleared the whole range.

Shares closed at around $698 that day, right before the results came out, which put them about 11% under their 52-week high of almost $780. Is Meta a buy now?

Image source: The Motley Fool.

More shares, same business

A split gives each shareholder more shares, but the total value of what they hold stays the same. Meta said it expects its Class A stock price to reflect a 2-for-1 split after the new shares are paid out as a dividend. And because the new shares have no votes, no one's voting power changes.

The charter change takes effect Jan. 19, 2027. Meta's board hasn't set the record and payment dates yet.

What's more interesting is why Meta wants a publicly traded share with no vote at all.

The company said the Class C stock can be used for raising money, paying employees, and making acquisitions, all while preserving the voting power of current Class A and Class B shareholders. It also said the setup helps keep founder and CEO Mark Zuckerberg running the company.

"We don't have any specific financing plans to announce at this time," CFO Susan Li said on the third-quarter earnings call.

Spending is cutting into Meta's cash

Still, the timing makes sense. Meta's capital expenditures (including principal payments on finance leases) rose to $34.9 billion in the third quarter, up from $31.1 billion in the second quarter and $19.8 billion in the first. So, free cash flow (the cash left after these investments) swung to negative $2.1 billion. It was $784 million in the second quarter and $12.4 billion in the first.

Meta also didn't buy back any stock in the first nine months of 2026, after repurchasing $26.2 billion of shares over the same stretch of 2025. And it expects "to continue investing aggressively" next year.

A share Meta can sell without diluting anyone's vote gives it another way to pay for all this. Of course, if it ever does sell Class C shares to raise money, current shareholders would own a smaller part of the business.

Advertisers are paying more

Showing how much advertisers value Meta's ads, the average price per ad climbed 14% year over year in the third quarter -- a pickup from 12% growth in both previous quarters and 6% in the fourth quarter of 2025. Ad impressions grew 10%, down from 19% in the first quarter and 14% in the second. Total revenue growth cooled from 28% in the second quarter to 26%, a far smaller fall than the five-point drop a quarter earlier. Meta expects fourth-quarter revenue of $73 billion to $76 billion, or growth of about 22% to 27% from $59.9 billion a year ago.

Put another way, Meta's ad volume is growing slower, but each ad is fetching a higher price. That suggests advertisers are getting results worth paying for. It's also the trend I wanted to see most in this report.

But profits didn't keep up. Operating income dropped 37% to $13 billion because of a $9.9 billion legal charge linked to an agreement with state attorneys general. Without the charge, operating income climbed 11% to $22.9 billion, far behind revenue growth.

The price still looks fair

At around $698, Meta shares trade at about 21 times 2027 earnings estimates. Meta's premium over the S&P 500 (SNPINDEX:^GSPC), which trades at about 19 times forward earnings, looks small for a company growing revenue at more than 25%.

Next year's spending plan still isn't known, and Meta might one day sell a meaningful amount of Class C stock. Either could weigh on the shares.

But I still think Meta stock is a buy, and the split has little to do with it. Advertisers keep paying more for each ad even while Meta pumps money into its AI build-out, and the shares cost just a bit more than the market's average. I'd be comfortable buying shares at today's price.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.