Meta (NASDAQ:META) stock has been flying higher in recent months. The business has benefitted from several factors that have sparked enthusiasm among investors, pushing the stock 30% higher in the past six months. With the share price hitting fresh all-time highs a few weeks back, is there still room for the momentum to keep going?
Why the stock has done well
To begin with, strong earnings have been a clear catalyst. The Q2 2025 results beat analyst expectations both on revenue and profits, triggering a sharp post-earnings jump in its share price. Within the results, the business showed accelerating growth in its advertising division, demonstrating that its core cash cow remains healthy even as it invests heavily elsewhere.
Talking about investing elsewhere, Meta is putting a lot of cash to work in AI innovation and related infrastructure. Building out data centres and raising its capital expenditures to support ambitious AI projects has caught the attention of investors. So far, this has been received positively, with many believing Meta may be well-positioned for a future where AI plays a significantly larger role.
Finally, the company is monetising more of its user base and adding new revenue streams. A big example is the move to roll out ads within WhatsApp. Further, new smart glasses under its Ray-Ban partnership were announced, bringing together AI with everyday essentials like glasses. These product innovations help support the narrative that Meta can scale further, which is beneficial for both earnings and the share price.
The direction from here
Even though the stock has risen sharply, the price-to-earnings (P/E) ratio is at 27.3. Don’t get me wrong, this is still well above the benchmark figure of 10 that I use to find a fair value. But Meta is a tech growth stock, meaning the expectation of future earnings growth is high. So, a ratio of 27.3 isn’t actually that high. For comparison, the Nasdaq index average P/E ratio is 28.5. So incredibly, Meta could be considered a better value than the average constituent!
From that angle, I think the stock could keep going from here. Without a stretched valuation and plenty of momentum with new product launches and innovation, things look good. However, I can’t ignore the risks.
One is the increasing scrutiny of big tech firms worldwide by governments. This is particularly focused on data privacy and potential monopolies in specific markets. New rules, fines, or restrictions could impact how Meta operates or monetises its platforms. Let’s also not forget that other companies are pushing hard to take market share away from Meta, particularly when it comes to AI development.
Even with these risks, I think the recent rally could keep going. On that basis, it’s a stock I’m considering and I think investors could do the same.
