Down 17%, Is Meta a Buy on the Dip?
2026-10-25 22:10
•Adria Cimino •The Motley Fool
••••• • Axe Cap view
Meta’s Dip Looks Tempting but Watch the Capex
Meta’s shares have dropped 17%, driven by fears over heavy AI spending, but its core ad business and AI rollout still make it interesting.
Meta’s 17% drop caught many investors off guard. The heavy capital expenditure forecast of $135-145 billion has spooked the market, signaling cautiousness around the AI bubble talk. Yet, with 3.6 billion daily active users and a proven advertising engine, Meta isn’t just spraying cash into the void. The rollout of Muse, their AI assistant, hints at new revenue streams beyond ads. Valued at 21 times forward earnings, Meta looks reasonable, especially against high-growth tech peers. For South African investors, watching USD/ZAR alongside Meta is wise. A weaker rand could dampen returns when converting profits back home. But if the AI investment pays off, Meta’s earnings could outpace expectations, helping offset FX pressures. This view could be wrong if AI competition intensifies faster or ad revenues falter amid economic slowdowns. this is just our opinion and not financial advice
Buy Meta on this dip, but keep exposure moderate. Hedge where possible against USD/ZAR swings since currency moves could hit returns sharply.
- META
- USD/ZAR
- Higher-than-expected capex diluting profits
- Rand weakening amplifying currency losses
6/10
Meta's stock has declined 17% from recent peaks amid investor concerns about AI infrastructure spending, with the company forecasting $135-145 billion in capex. However, the article argues Meta remains a compelling buy given its strong advertising business, 3.6 billion daily active users across its platforms, successful AI product launches, and reasonable valuation at 21x forward earnings. The company's AI investments are expected to enhance user engagement and advertising effectiveness while opening new revenue streams through its Muse AI agent.
Our take is based on reporting first published by The Motley Fool.