Meta Platforms: A Case for Undervaluation Amid AI and Metaverse Transformation

Meta Platforms (META) has experienced a sharp correction in its stock price following the release of its Q3 2025 earnings, with shares falling over 16% since the report according to MarketBeat. While the decline has drawn attention to short-term technical indicators-such as the stock trading below its 20-week moving average as reported by Investing.com-the fundamentals suggest a compelling case for undervaluation. The company's strategic pivot toward AI-driven advertising and infrastructure, coupled with long-term metaverse ambitions, positions it for sustained growth despite near-term volatility.

Strong Financials Masked by a One-Time Tax Charge

Meta's Q3 2025 results highlighted robust operational performance, with revenue surging 26% year-over-year to $51.24 billion as per the investor release. Advertising revenue, a core driver, grew 22.7% in the U.S. and Canada to $21.33 billion, while Asia-Pacific saw a 25% increase according to Yahoo Finance. The company also reported a record 3.54 billion daily active users across its platforms as stated in the earnings report. However, a non-cash tax charge of $15.93 billion-stemming from a restructuring of its global tax strategy-skewed net income to $2.71 billion, down from $15.69 billion in the prior year according to the investor release. Excluding this charge, adjusted net income would have reached $18.64 billion, with earnings per share (EPS) of $7.25, a 19% year-over-year increase as reported by Yahoo Finance.

This anomaly has created a misleading narrative about Meta's profitability. Analysts note that the adjusted EPS figure still outperforms expectations, and the company's free cash flow remained resilient at $10.62 billion as per the investor release. The stock's decline, therefore, appears to reflect overreaction to a non-operational accounting event rather than a deterioration in underlying business performance.

Strategic Reinvestment in AI and Metaverse

Meta's capital expenditures (CapEx) rose to $19.37 billion in Q3 2025, with a significant portion allocated to AI infrastructure according to Investors.com. The company has committed up to $72 billion in 2025 for AI data centers and custom chip development as reported by Yahoo Finance, signaling its intent to lead in next-generation advertising and content moderation. These investments are already yielding results: AI-powered ad tools have driven a 30% year-over-year increase in usage and mid-40% improvements in campaign conversion rates according to CommunicateOnline.

While the metaverse remains a long-term bet, Meta is recalibrating its approach. The Reality Labs division, which has incurred over $70 billion in cumulative losses since 2021 according to Virtual Reality News, will see a 30% budget cut in 2026 as reported by Virtual Reality News. However, this shift does not signal abandonment of the metaverse. Instead, the company is focusing on practical applications like Ray-Ban Meta AI glasses, which have tripled in sales year-over-year as noted by The New York Times. Analysts at Rosenblatt Securities argue that Meta's pivot to AI and wearables could unlock "rocket ship growth," with the global metaverse market projected to expand from $146.6 billion in 2024 to $1.1 trillion by 2030 according to 24/7 Wall St.

Analyst Optimism and Valuation Attractiveness

Despite the recent selloff, Wall Street analysts remain cautiously optimistic. The average price target for Meta has only dipped 5% since the earnings report, implying a potential 23% to 37% upside according to MarketBeat. BofA Securities and Cantor Fitzgerald maintain "Buy" or "Overweight" ratings, anticipating a "sentiment reversal" in 2026 if AI integration accelerates as reported by Yahoo Finance.

Valuation metrics further support the case for undervaluation. Meta's forward P/E ratio of 22x is more attractive than peers like Alphabet according to BigSpringHerald, and its free cash flow of $52.1 billion in 2024 underscores financial strength as projected by 24/7 Wall St. Long-term forecasts from 24/7 Wall St project revenue growth from $161.58 billion in 2024 to $274.95 billion by 2030, with a compound annual growth rate (CAGR) of 4.32% according to 24/7 Wall St. If realized, this trajectory would justify a stock price of $1,216.82 by 2030-a 82.7% upside from current levels according to 24/7 Wall St.

Technical Indicators and Market Sentiment

While the stock's 20-week moving average currently acts as a resistance level at $673.93 as reported by Investing.com, technical analysts note short-term strength, with shares recently climbing above the 21-day moving average according to Investors.com. The recent 16% drop has created a "buy-the-dip" opportunity, particularly given that analysts' price targets have not significantly adjusted downward according to MarketBeat. Rosenblatt Securities' $1,117 price target-a 70% upside-reflects confidence in Meta's AI-driven transformation as reported by CNBC.

Conclusion: A Strategic Rebalance, Not a Decline

Meta's stock correction is a buying opportunity for investors who recognize the company's strategic realignment. The one-time tax charge has distorted short-term earnings, but the underlying business-driven by AI innovation, ad revenue growth, and a recalibrated metaverse strategy-remains robust. With a forward P/E discount to peers, strong free cash flow, and long-term market tailwinds, Meta appears undervalued despite its recent volatility. As AI integration and smart glass adoption accelerate, the market may soon reassess the stock's true worth.