Is Meta Platforms (META) Stock Undervalued Amid AI Bet and Mixed Analyst Ratings?

Meta Platforms (META) has long been a focal point for investors seeking exposure to the intersection of artificial intelligence (AI) and digital advertising. As of December 2025, the stock trades at a price-to-earnings (P/E) ratio of 28.53, a price-to-sales (P/S) ratio of approximately 9.86, and a price-to-book (P/B) ratio of 9.53 according to fullratio.com. These metrics, while elevated relative to historical averages, suggest a nuanced picture of valuation resilience and long-term growth potential. This analysis explores whether META is undervalued amid its aggressive AI investments and divergent analyst opinions.

Valuation Metrics: A Mixed Signal

Meta's current P/E ratio of 28.53 is 2.6% below its 10-year average of 29.3 but remains above the Technology sector average of 31.36 according to fullratio.com. This positions META as relatively undervalued compared to its own historical performance but not necessarily against its peers. The P/S ratio of 9.86, meanwhile, exceeds the Interactive Media & Services industry average of 7.076 and the broader Technology sector average of 8.8x according to eqvista.com. This premium reflects investor confidence in Meta's ability to monetize its vast user base and AI-driven ad innovations.

The P/B ratio further underscores this optimism. After declining from 5.88 in 2020 to 3.89 in 2022, the ratio surged to 9.53 in 2024 according to stock-analysis-on.net. This rebound suggests a reassessment of Meta's net asset value, particularly as the company shifts toward capital-intensive AI infrastructure. While the P/B ratio is not a traditional metric for tech firms, its upward trajectory highlights growing expectations for Meta's long-term profitability.

AI Investments: A High-Stakes Bet

Meta's 2025 capital expenditures (capex) of $70–72 billion-a 81% increase from 2024-underscore its commitment to AI according to the fool.com. These funds are directed toward data centers, servers, and network upgrades to support AI-driven ad targeting and user engagement. The rationale is clear: AI has already contributed to a 26% year-over-year revenue increase in Q3 2025, with operating income rising 18% to $20.5 billion according to the fool.com. Analysts like Scott Devitt of Wedbush argue that these investments are paying off, with AI enhancing ad performance and bolstering Meta's Reality Labs hardware business according to seekingalpha.com.

However, the capital intensity of this strategy has sparked caution. Oppenheimer and Benchmark downgraded the stock following Q3 earnings, citing concerns about the sustainability of returns amid rising capex according to nasdaq.com. CFO Susan Li acknowledged that 2026 capex will likely exceed $100 billion, transforming Meta from an asset-light ad platform into a capital-intensive infrastructure provider according to morningstar.com. This shift raises questions about whether the market will continue to reward Meta with a premium valuation if returns on equity (ROE) decline.

Analyst Sentiment: Optimism vs. Pragmatism

The divergence in analyst ratings reflects the tension between Meta's growth narrative and its financial realities. Cantor Fitzgerald and Wedbush maintain overweight ratings, with price targets of $920, anticipating a "sentiment reversal" in 2026 as AI execution improves according to finance.yahoo.com. Conversely, skeptics argue that the company's reliance on AI-driven ad revenue is a double-edged sword. If user engagement plateaus or ad pricing softens, the high capex burden could weigh on margins.

This duality is evident in Meta's stock performance. While Q3 results demonstrated resilience, the projected $100 billion capex for 2026 has led some analysts to question whether the company can maintain its historical ROE of 30%+ according to nasdaq.com. The key will be Meta's ability to balance infrastructure spending with monetization-turning AI into a scalable, profitable engine rather than a cost center.

Conclusion: A Case of Strategic Resilience

Meta's valuation metrics suggest it is neither drastically undervalued nor overpriced. The P/E and P/S ratios align with sector averages, while the P/B ratio reflects growing confidence in its AI-driven transformation. The company's long-term growth potential hinges on its ability to execute its AI strategy profitably. If Meta can sustain revenue growth and demonstrate that its capex investments yield durable returns, the current valuation could prove resilient. However, investors must remain cautious about the risks of capital intensity and market saturation.

In the end, META's stock is a bet on the future of AI-driven advertising. For those who believe in Meta's ability to innovate and monetize its ecosystem, the current valuation offers a compelling entry point. For skeptics, the mixed analyst ratings and rising capex serve as a reminder that even the most ambitious strategies require execution.