What counts as a “normal” P/E often reflects how quickly earnings are expected to grow and how much risk investors see in those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually points to a lower one.

Meta Platforms currently trades on a P/E of 28.01x. That is above the Interactive Media and Services industry average of 15.45x, but below the peer group average of 34.93x. Simply Wall St also estimates a proprietary Fair Ratio for Meta of 39.09x, which is the P/E level they would expect given factors such as earnings growth, profit margins, industry, market cap and risk profile.

The Fair Ratio can be more useful than a simple peer or industry comparison because it adjusts for Meta’s specific characteristics rather than treating all companies as if they were the same. Compared with the current 28.01x P/E, the Fair Ratio of 39.09x indicates that the shares appear undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1462 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple tool on Simply Wall St’s Community page where you connect your view of Meta Platforms, including future revenue, earnings and margins, to a financial forecast and a fair value. You can then compare that fair value to the current share price to help you decide what action makes sense. The Narrative updates automatically as new news or earnings arrive, and different investors can express very different stories, such as one Narrative using a fair value of US$538.09 and another using US$837.15 for the same Meta stock.

For Meta Platforms however we will make it straightforward, with previews of two leading Meta Platforms Narratives:

🐂 Meta Platforms Bull Case

Fair value used in this bullish Narrative: US$837.15 per share

Implied discount to this fair value at US$650.41: about 22.3% undervalued

Revenue growth assumption: 16.67% a year

• AI driven ad targeting, messaging monetization and a broad social and commerce ecosystem are expected to support durable revenue growth and high engagement across Meta’s platforms.

• Heavy investment in AI infrastructure and Reality Labs is treated as a long term enabler of scale, with analysts building in higher revenue and substantial earnings by 2028.

• Key risks include rising capex and operating expenses, ongoing Reality Labs losses and regulatory pressure, which could weigh on margins if revenue does not keep pace.

🐻 Meta Platforms Bear Case

Fair value used in this more cautious Narrative: US$538.09 per share

Implied premium to this fair value at US$650.41: about 20.9% overvalued

Revenue growth assumption: 10.5% a year

• Meta is expected to keep a strong position in social media, AI and AR or VR, but the author sees a limit to how much of that is already reflected in the share price.

• The thesis relies on continued ARPU growth, AR or VR adoption and cost cutting, while acknowledging large ongoing losses in Reality Labs and high AI capex commitments.

• Regulation, ad market dependence, execution risk in the metaverse and cybersecurity concerns feature as central risks that could restrain earnings and the valuation multiple.

Putting these side by side gives you a practical range of outcomes, from a bullish fair value of about US$837 to a more conservative US$538, so you can decide which set of assumptions feels closer to your own view of Meta’s future.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there’s more to the story for Meta Platforms? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include META.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com