Should You Buy Meta Stock Before the Huge Investor Update?

Summary

Parkev Tatevosian is bullish on Meta Platforms ahead of its quarterly earnings report, scheduled for after market close on October 21. He says Meta’s early AI product traction and improving advertising metrics support the investment case, while flagging rising AI infrastructure costs and the risk of taking on too much debt.

Meta’s recent performance and operating trends

• Meta Muse, described as a personal agent, reportedly reached 5 million downloads faster than ChatGPT or Anthropic.
• Meta shares were up more than 11.75% year to date at the time of recording. The stock had recently fallen to about $550 before rising to roughly $734–$737.
• In the most recently completed quarter:
  • Revenue grew 28% to $60.8 billion, its fastest growth in a long time.
  • Operating profit fell 8% to $18.8 billion as the company increased AI investment.
  • The number of people using at least one Meta app reached 3.6 billion as of June 2026, up 3% year over year.
  • Ad impressions increased 14%, while the average price per ad rose 12%.
• Tatevosian views rising ad impressions and prices together as evidence that user engagement—not simply showing users more ads—is supporting ad effectiveness.
• Meta’s employee count was down 1% year over year while revenue rose 28%. He presents this as an example of productivity gains and argues that AI investment may be improving Meta’s core products and competitive position.

Earnings expectations and metrics to watch

Meta forecast third-quarter revenue of $61 billion–$64 billion. Tatevosian expects results to be near or above the upper end of that range, citing advertising demand, including spending ahead of U.S. midterm elections.

His earnings checklist includes:

• Revenue growth
• Ad impressions and average ad prices
• Daily active users and overall platform engagement
• Meta Muse users, recent adoption, and whether adoption is accelerating
• Capital expenditure guidance
• Operating cash flow to fund AI investment

AI investment, cash flow, and risks

• Meta had said it planned $130 billion–$145 billion of capital expenditures in 2026. Tatevosian says the range could be raised—for example, to $135 billion–$145 billion or $140 billion–$150 billion—because of inflation and higher costs for components, materials, land, electricity, and data-center construction.
• He does not necessarily expect Meta to expand its planned capacity. Rather, he thinks the same computing capacity may cost more than originally expected.
• Operating cash flow:
  • $32 billion for the three months ended June 30, versus $25.6 billion in the same quarter a year earlier.
  • $64 billion in the first six months of 2026, versus $50 billion in the comparable period, an increase of about 28%.
  • Annualized, the first-half figure implies roughly $130 billion, approximately in line with the stated capital-spending range.
• He prefers AI investments to be self-funded by operating cash flow. He cautions against allowing spending to exceed those limits, especially since Meta has already added tens of billions of dollars in debt. He would prefer the company to spread some construction costs over time rather than concentrate them in one year.

Valuation and investment view

• Meta was trading at a stated forward P/E of 21.3. Tatevosian considers that inexpensive relative to the company’s growth prospects.
• His discounted cash flow estimate values Meta at $914 per share, compared with a market price cited around $737. He estimates approximately 24% potential upside over 12–18 months.
• He ranks Meta as his second-best stock pick, behind Nvidia. Netflix is third, with Amazon competing for third or fourth place.
• He says Meta Muse is not yet included in the company’s revenue-generating capabilities and sees its potential as an additional opportunity.

Suggested approach around earnings

Tatevosian’s proposed approach depends on an investor’s existing position and risk tolerance:

• For someone with no Meta shares, he would buy 75% of the intended allocation before earnings and 25% afterward.
• For a more risk-neutral or downside-conscious approach, he suggests splitting the purchase 50% before and 50% after.
• Investors who already have a large Meta position may prefer to wait and consider buying after the report.
• He notes that the stock could move 5%, 10%, or 20% in either direction after earnings. Staged buying can provide exposure to a potential rally while keeping some capital available if the shares fall.

Other assets, companies, and dates mentioned

• Meta Platforms (META)
• Nvidia (NVDA)
• Netflix (NFLX) — earnings livestream mentioned for October 20
• Amazon (AMZN)
• ChatGPT and Anthropic — referenced in comparison with Meta Muse
• U.S. midterm-election advertising — cited as a potential driver of ad spending

Disclosures

Tatevosian says he owns Meta shares and has been bullish on the stock. The video thanks The Motley Fool for sponsoring it and promotes a Motley Fool offer. No explicit “not financial advice” disclaimer appears in the subtitles.

Presenter/source: Parkev Tatevosian, CFA; The Motley Fool is identified as the video sponsor.