MW Meta's stock is trading at a stark discount to Alphabet's. Why analysts see a prime buying opportunity.

By Christine Ji

Meta's stock been a Big Tech laggard, but a new frontier AI model could soon bridge the valuation gap relative to Alphabet's stock, Jefferies analyst Brent Thill argues

Shares of Meta have fallen 18% since the last earnings call over concerns of overspending on artificial-intelligence infrastructure.

The tech stocks known as the Magnificent Seven have fallen out of favor, and Meta Platforms has been one of the weakest performers of that bunch, but some on Wall Street now believe the negative sentiment has gone too far.

Shares of Meta (META) have fallen 18% since the company last reported earnings at the end of October, while shares of Alphabet $(GOOGL)$ $(GOOG)$ and Amazon.com (AMZN) have risen 18% and 4%, respectively, since those companies' last earnings reports. That divergence has left Meta trading at a massive forward price-to-earnings discount relative to Alphabet. Meta's stock trades at 20.1x forward earnings, compared with 28.3x for Alphabet's, and that discount is much larger than "historical norms," Jefferies analyst Brent Thill wrote in a Thursday note.

For context, Alphabet has a five-year average forward P/E of 21.7, while Meta's five-year average is 21, according to FactSet data.

The primary drag on Meta's stock has been the aggressive ramp-up in capital expenditures meant to fund the Facebook parent company's data-center buildout. On the last earnings call, Meta signaled roughly $110 billion of planned capital expenditures in 2026, which would make for a 56% year-over-year increase. The company also anticipates that total expenses will grow at a faster rate in 2026 than in 2025 due to higher infrastructure costs. Wall Street projects that total expenses will grow to $150 billion in 2026, resulting in nearly 5 percentage points of operating-margin compression.

However, Thill argues that the "peak pressure" is likely already priced into the stock after the recent decline, making it so that Meta's potential upside outweighs the risks.

Meta is developing new text and image artificial-intelligence models rumored for release in the first half of 2026, and Thill believes the new product launch could be a catalyst for shares. While Meta's most recent Llama 4 model struggled to keep pace with rivals in 2025, the new models could change the narrative and show that Meta's high-profile hirings of AI talent are paying off. Additionally, recent budget cuts in its metaverse division are a positive sign that Meta is focusing on controlling costs, Thill added.

Read: After Meta's AI spending spree, is it time for another 'year of efficiency'?

In the meantime, Thill noted, Meta has been putting artificial intelligence to work to optimize its ad performance by moving toward a "unified AI system" to power its entire family of apps. By using AI models to more effectively target ads, Meta has been able to grow engagement across its platforms. Last quarter, the company reported that the annual revenue run rate for its end-to-end AI-powered ad tools had surpassed $60 billion.

Thill also sees an overlooked opportunity in WhatsApp, which has the most daily active active users of any Meta app but remains largely undermonetized. Thill estimates that the messaging platform is currently generating revenue at a $9 billion run rate, but he sees a path for that to quadruple by fiscal year 2029.

Thill maintained his buy rating and $910 price target, implying nearly 50% upside from current levels.

"We see limited downside from here, with upside driven by top-line strength and continued efficiency gains," which can offset growth in operating expenses, he wrote.

More: Why Alphabet and Meta investors shouldn't sweat ChatGPT's ad launch - for now

-Christine Ji

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January 22, 2026 10:22 ET (15:22 GMT)

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