Should Investors Buy the Meta Platforms Dip?
Meta Platforms (META -0.96%) reported better-than-anticipated third-quarter earnings, but you wouldn’t know it from the drop in stock price. Shares of Meta fell more than 7% Thursday and have decreased nearly 10% over the past week. Should investors buy the dip? Let’s have a look.
META Meta Platforms
$642.62-$6.23 (-0.96%)
NASDAQ · As of 4:00 PM ET 10/23/26
Meta’s business is picking up steam, with revenue growing 26% year over year to $64.6 billion. This soundly beat Wall Street’s estimates. The problem is that Meta’s spending is making investors nervous. Mark Zuckerberg’s social media company saw its free cash flow swing to a negative $2.1 billion. This is the first negative free cash flow number since the company went public in 2012.
Furthermore, spending on AI infrastructure exploded 80% to nearly $35 billion. Management now expects capital expenditures to be between $135 billion and $145 billion for the full year, up from its previous guidance of $130 billion. Lastly, Meta plans to offer a new class of nonvoting shares to help finance this growth. This means dilution for current investors is very much on the table.
Image source: The Motley Fool.
Although spending is quite high, it appears to be paying off, as Meta’s AI investments are driving stronger ad performance and engagement. There’s still plenty of risk, and negative free cash flow could persist for several more quarters. Still, with revenue growing at this pace and its powerful ad business gaining even more strength, Meta’s latest dip looks attractive.
Although the company’s market cap is approaching $2 trillion, Meta’s stock is also quite reasonably priced compared to many technology peers. More importantly, I’ve learned not to bet against Zuckerberg and his vision over the long term.
Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
