Following positive developments in U.S.-China trade negotiations, Meta stock (NASDAQ:META) is trending upward, showing a 7% gain in pre-market trading. This surge is likely driven by the announcement that both nations have agreed to a 90-day pause on tariff increases and a significant reduction in existing tariff levels. Specifically, reciprocal tariffs are set to decrease by 115%, from the current 125% to 10%.
Previously, investors had expressed concerns about the potential impact of tariffs on Meta Platforms. Meta’s business model necessitates significant infrastructure scaling to support its algorithms, power Reels, and advance its growing AI capabilities. Higher tariffs would have increased the cost of this infrastructure development. Coupled with anxieties regarding a possible pullback in advertising spending, this created a worrisome outlook for the company.
However, the newly announced 90-day tariff pause is being viewed favorably by investors, alleviating some of these immediate concerns. Furthermore, the substantial tariff reduction signals a potential breakthrough in trade discussions, indicating a shared desire to ease trade tensions. Market attention will now turn to whether this development signifies the start of a more comprehensive and lasting trade agreement. Also, see – Is The U.S.-China Trade War Over?
Beyond these macroeconomic factors, META stock appears to be an attractive investment at its current pre-market price of approximately $630. We believe that the concerns surrounding META stock are currently minimal, making its high valuation justified.
Our positive assessment is based on a comparison of META’s present valuation against its recent operating performance, as well as its current and historical financial health. Our analysis across key metrics—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that Meta Platforms exhibits very strong operating performance and a robust financial condition, as will be detailed subsequently.
However, for investors who seek lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – Will AI Really Disrupt Google’s Search Empire?
How Does Meta Platforms’ Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, META stock looks expensive compared to the broader market.
- Meta Platforms has a price-to-sales (P/S) ratio of 9.7 vs. a figure of 2.8 for the S&P 500
- And, it has a price-to-earnings (P/E) ratio of 24.7 vs. the benchmark’s 24.5
How Have Meta Platforms’ Revenues Grown Over Recent Years?
Meta Platforms’ Revenues have grown considerably over recent years.
- Meta Platforms has seen its top line grow at an average rate of 12.2% over the last 3 years (vs. increase of 6.2% for S&P 500)
- Also, its quarterly revenues grew 16% to $42.3 Bil in the most recent quarter from $36.5 Bil a year ago (vs. 4.9% improvement for S&P 500)
How Profitable Is Meta Platforms?
Meta Platforms’ profit margins are considerably higher than most companies in the Trefis coverage universe.
Does Meta Platforms Look Financially Stable?
Meta Platforms’ balance sheet looks very strong.
- Meta Platforms’ Debt figure was $49 Bil at the end of the most recent quarter, while its market capitalization is $1.5 Tril (as of 5/9/2025). This implies a very strong Debt-to-Equity Ratio of 3.5% (vs. 21.5% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $78 Bil of the $276 Bil in Total Assets for Meta Platforms. This yields a very strong Cash-to-Assets Ratio of 28.2% (vs. 15.0% for S&P 500)
How Resilient Is META Stock During A Downturn?
META stock has seen an impact that was slightly worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- META stock fell 76.7% from a high of $382.18 on 7 September 2021 to $88.91 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 19 January 2024
- Since then, the stock has increased to a high of $736.67 on 17 February 2025 and currently trades at around $590
Covid Pandemic (2020)
- META stock fell 34.6% from a high of $223.23 on 29 January 2020 to $146.01 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 20 May 2020
Putting All The Pieces Together: What It Means For META Stock
In summary, Meta Platforms’ performance across the parameters detailed above are as follows:
- Growth: Extremely Strong
- Profitability: Extremely Strong
- Financial Stability: Extremely Strong
- Downturn Resilience: Neutral
- Overall: Very Strong
META stock demonstrated strong performance across the key parameters we analyzed. While its valuation of 9.7x trailing revenues is on the higher end, this appears justified by its accelerating sales growth and improving profitability. In light of these strong fundamentals, and now considering the positive momentum generated by the U.S.-China trade talk developments and the 90-day tariff pause, we believe that META stock still presents a compelling buying opportunity for substantial long-term gains.
While META stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Read the full article here
