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The Magnificent Seven stocks are some of the most storied members of the S&P 500. These growth stocks have outperformed major benchmarks for many years, but amid a stock market rally, Meta Platforms (NASDAQ:META) hasn’t kept up. Facebook’s parent company is lagging the S&P 500 this year, but it’s set for a strong rebound in 2026. These are some of the catalysts that can drive Meta Platforms stock higher.
The Valuation Is Low For What You’re Getting
Meta Platforms currently trades at a 29.8 P/E ratio while offering strong financial growth. The tech giant delivered 26% year-over-year revenue growth in the third quarter, and while net income was down year-over-year, the company has committed to trimming its Realty Lab expenses. The segment has burned through $71 billion of Meta Platforms’ profits since 2021.
Smarter financial management and the continued growth of Meta Platforms’ ad business are two catalysts that make its P/E ratio more attractive. While other Magnificent Seven members have P/E ratios in the 30s and 40s, Meta Platforms is one of the few that offers a valuation in the high 20s. It’s even better when you look at Meta Platforms’ forward P/E ratio, which is currently 24.6.
Meta Platforms’ net income decline is actually a one-off issue due to some tax policy changes. Facebook’s parent company ended up paying $18.95 billion in taxes this quarter compared to $2.13 billion in the same time last year. Its total tax bill increased by 788% year-over-year, which significantly contributed to its declining net income. If you get rid of this one-off tax event and focus on Meta Platforms’ income from operations, you will see an 18% year-over-year growth rate.
Smart Glasses And Other AI Investments Can Help The Company Diversify Beyond Online Ads
Online ads have been great for Meta Platforms, but it aims to diversify into additional revenue streams. It’s similar to how Alphabet (NASDAQ:GOOG) branched out from search and now makes revenue from Google Cloud, AI chips, Waymo, and other revenue streams. Meta Platforms has its sights set on smart glasses that aim to challenge smartphones.
Zuckerberg believes this can be the most exciting time of the company’s history if it manages to execute on a fraction of the upcoming opportunities. Meta Platforms has positioned itself as a leader in the AI glasses industry. Its Phoenix AI smart glasses are projected to become available in early 2027, so investors will have to be patient. However, any news around the project and successful prototypes in 2026 may be enough to generate momentum for the stock.
Meta Platforms can invest in other AI products in the future. Smart glasses can also boost Meta Platforms’ ad revenue since it won’t be subject to Apple’s (NASDAQ:AAPL) iOS privacy restrictions that prevent broad user tracking. Creating its own devices lets Meta Platforms get past this loophole, and doing so will allow the company to create more targeted and effective ad campaigns. Finally, taking some market share away from Apple frees more of its revenue from Apple’s 30% service fee.
Meta Platforms’ Social Networks Continue To Grow
As Meta Platforms continues to wait for its AI investments to pay off, its family of apps continues to flourish. Meta Platforms wrapped up the quarter with 3.54 billion daily active users, which was up by 8% year-over-year. The company also increased its ad impressions by 14% year-over-year.
A highly engaged user base that continues to expand gives the company more opportunities to display ads and monetize its users. Facebook’s parent company has helped many businesses produce ROIs from ads, and as the returns grow, Meta Platforms stands to receive more ad revenue.
It’s the largest and most reliable part of Meta Platforms’ business. Continued social media success results in significant positive cash flow, which makes it easier to fund long-term investment opportunities.