META Platforms (NASDAQ: META) has seen a significant boost in its stock price, fueled by investor optimism regarding rising user engagement and sustained strong quarterly performance. In 2025 alone, META has surged by 16%, outpacing the 2% increase in the Nasdaq Composite Index.
When examining META’s performance over a longer period, the gains are even more striking. Since the start of 2024, META’s stock has delivered an astonishing 97% return, rising from around $350 per share to nearly $700. In comparison, the Nasdaq index has climbed 31% during the same period.
META’s impressive 97% growth can be attributed to three key factors:
Price-to-Sales Ratio (P/S): Up 54%, from 6.9x in 2023 to 10.6x currently.
Revenue Growth: 26% increase, from $135 billion to $170 billion.
Shares Outstanding: A slight 1% decrease, reducing to 2.6 billion shares.
Let’s break down these factors in detail. Although META stock has shown strong performance, for those seeking smoother upward potential than an individual stock, high-quality portfolios that have outperformed the S&P 500 might be worth considering. This includes portfolios with returns of over 91% since inception.
Key Drivers of META’s Revenue Growth
META Platforms operates the world’s most popular social network, connecting people with friends and family. The company’s main revenue source is advertising, where it targets specific audiences based on the information users share on its platform.
META’s recent revenue growth can be attributed to a combination of increased ad impressions and rising average prices per ad. Additionally, META’s Daily Active People (DAP) grew by 7.5%, rising from 3.19 billion in 2021 to 3.43 billion. The company also benefited from AI-driven improvements, allowing it to serve more ads and generate higher revenues. META is further expanding AI capabilities to generate additional content.
In the past three years, META has not only boosted its sales but also expanded its net profit margin from 29% in 2023 to 39% today. Thanks to $63 billion in stock repurchases since 2023, META’s shares outstanding have decreased by 1%, further enhancing profitability. This growth in revenue, margins, and a reduction in outstanding shares has resulted in META’s current net profit of $25.58 per share, up 72% from $14.87 in 2023.
Why META’s Valuation Multiple Has Increased
Investor confidence in META is understandable, given the company’s healthy growth in ad impressions and average prices per ad. However, the major driver of this optimism is META’s aggressive push into artificial intelligence (AI). This is not just a buzzword—AI is directly boosting advertising revenues in several ways:
Increased User Engagement: AI drives more interactions on its platform.
Better Ad Targeting: Advertisers receive more efficient ad targeting, which leads to improved results and higher ad spend.
Enhanced Overall Ad Performance: By increasing revenue per user and improving conversion rates for businesses running ads, AI boosts META’s overall advertising outcomes.
META is deeply integrating generative AI across its entire social media ecosystem. This includes features like the Meta AI virtual assistant, advanced image generation tools, and powerful photo editing capabilities. Additionally, its Llama AI model is rapidly attracting a large user base, further strengthening its leadership in AI. These growth factors, combined with META’s improving profitability (demonstrated by its robust 39% net profit margin), have significantly increased investor confidence. As a result, the company’s P/S ratio has increased from 6.9x in 2023 to the current 10.6x.
Does META Stock Have Room to Grow?
While META’s stock has performed well since early 2024, its growth has not been consistent. The stock returned 23% in 2021, dropped 64% in 2022, surged 194% in 2023, and rose 66% in 2024. By comparison, the S&P 500 returned 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024, which shows that META underperformed the S&P 500 in both 2021 and 2022.
In contrast, Trefis’ high-quality (HQ) portfolio, which includes 30 stocks, has consistently outperformed the S&P 500 in the past four years. Why is that? The stocks in the HQ portfolio generally provide higher returns with lower risks and show lower volatility compared to the benchmark index.
Given the current uncertain macroeconomic environment—marked by trade tensions, interest rate cuts, and geopolitical risks—the question remains: will META face challenges similar to 2021 and 2022, potentially underperforming the S&P 500 in the next 12 months, or will it continue its strong growth?
Conclusion
From a valuation perspective, we believe META’s stock is currently fairly priced. We estimate the company’s valuation at $702 per share, very close to its current market price. The stock’s price-to-earnings ratio is 10.6x its past revenue, significantly higher than its four-year average P/S of 6.8x.
Given META’s recent strong ad growth, a slight uptick in its valuation multiple seems justified. However, investors should also consider the inherent risks. It remains uncertain just how much AI will drive long-term profit growth for the company. This uncertainty makes META’s ongoing investment in AI a potential risk factor. Specifically, since 2023, META has spent $77 billion in capital expenditures, with plans to invest an additional $64 billion to $72 billion in AI infrastructure this year alone.
While META’s stock valuation appears to be at a reasonable level, it may be helpful to compare META with its peers across key metrics. You can find valuable cross-industry comparisons in the “Peer Comparison” section for further insights.
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