Source: PaxForex Premium Analytics Portal, Fundamental Insight
Meta Platforms has seen its stock price skyrocket nearly 660% over the past ten years, propelled by the exponential growth of its flagship apps (Facebook, Instagram, Messenger, and WhatsApp) and a surge in advertising revenue. This success has placed Meta in a near-duopoly in the digital ad market, sharing dominance with Alphabet's Google in numerous regions.
During the same period, Alphabet's shares rose just over 500%. Google’s growth was primarily fueled by its search engine, YouTube, and cloud services. These platforms, along with Android, Chrome, Gmail, and others, provided a wealth of data, further bolstering its core ad business. However, Google faces challenges in the cloud sector, struggles to establish a major social media platform, and is under pressure from generative AI search engines like OpenAI’s SearchGPT, as well as antitrust investigations, including the DOJ’s push to sell Chrome.
Currently, Meta's market capitalization stands at $1.4 trillion, while Alphabet is valued at $2 trillion. Could Meta surpass Alphabet’s valuation by the end of 2025? Let’s dive into the financials of these two tech giants to analyze this possibility.
Both companies are heavily reliant on digital ads, although Meta’s revenue has grown at a slightly higher compound annual growth rate (CAGR) of 19% from 2018 to 2023, compared to Alphabet’s 18%. Both firms encountered a slump in 2020 due to the pandemic’s impact on advertising budgets, but Google mitigated this with growth in Google Cloud. Both saw rebounds in 2021 as the pandemic's effects waned, though Meta faced greater challenges due to Apple’s iOS updates and rising competition from TikTok.
By 2023, Meta’s growth regained momentum, aided by AI-driven tools for collecting first-party data, expanding Reels to compete with TikTok, and securing large ad contracts from Chinese firms. Alphabet, on the other hand, experienced slower growth due to macroeconomic pressures and increasing competition in the advertising space, with YouTube also slowing.
Looking ahead, Meta’s revenue is expected to grow at a CAGR of 16% from 2023 to 2026, with earnings per share (EPS) projected to rise by 25%. Much of this growth will be driven by Meta’s expanding app ecosystem and its augmented and virtual reality initiatives via its Reality Labs unit, despite ongoing losses in that division.
For Alphabet, analysts forecast a 12% CAGR in revenue and a 21% growth in EPS through 2026, contingent on stable ad and cloud sales and no major disruptions from generative AI or antitrust cases. However, if the DOJ succeeds in forcing Google to divest Chrome, its growth projections could be significantly impacted.
Currently, Alphabet trades at 19 times forward earnings, making it the cheapest among the Magnificent Seven stocks, with Meta following at 22 times forward earnings. If both stocks meet analysts' expectations by the end of 2025, Alphabet’s market cap could grow by 16% to $2.4 trillion, while Meta’s would rise to $1.6 trillion.
However, if both stocks trade at 20 times forward earnings, Alphabet would be valued at $2.6 trillion, leaving Meta at around $1.4 trillion. Thus, unless Alphabet’s growth significantly falters, it’s unlikely that Meta will surpass its valuation by 2025. Still, Meta’s stronger growth trajectory and relatively lighter regulatory burdens may position it as a better long-term investment.
As long as the price is above 550.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 568.67
- Take Profit 1: 580.00
- Take Profit 2: 600.00
Alternative scenario:
If the level of 550.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 550.00
- Take Profit 1: 530.00
- Take Profit 2: 510.00
