Alphabet's stock took off last year after the company got a legal settlement out of the way, and now Meta's stock is looking at a similar setup
Shares of Meta currently trade at a roughly 25% discount to the company's long-term average.
Meta Platforms recently agreed to a $17 billion settlement over social-media addiction claims - and in the eyes of Wall Street analysts, that could be a small price to pay for the company to clear a major legal hurdle and get investors to think about the stock in a new light.
Morgan Stanley analyst Brian Nowak compared Meta's (META) recent agreement to Alphabet's (GOOGL) (GOOG) September 2025 legal ruling, which resolved the Justice Department's landmark antitrust case surrounding Google's search dominance. That settlement paved the way for the company to release artificial-intelligence tools such as Gemini 3, AI Overviews and others.
In the last quarter of 2025, Alphabet's price-to-earnings multiple expanded roughly 40%, Nowak said, meaning Wall Street came to value the stock much more favorably.
"There are certainly signals, in our view, that Meta's product pipeline could start flowing following this legal clearing event," just like Alphabet's did, Nowak wrote in a Sunday note. Nowak rates the stock at overweight with a price target of $775 - 36% above current levels.
For Meta, Nowak sees multiple new products in the pipeline, such as an improved MetaAI, agentic ad tools for small and medium-size businesses, new subscription opportunities and a potential cloud lever. In aggregate, these offerings could add over $10 to earnings per share, according to Nowak.
With shares of Meta currently trading at 16 times forward earnings, Nowak doesn't believe Meta's new products are priced into the stock. At these levels, shares of Meta are trading at a 25% discount to their long-term average and a roughly 45% discount to their 2025 peak levels, according to Nowak.
Additionally, Meta could be better positioned to face regulatory headwinds on social-media usage compared with other platforms. As part of the settlement, Meta will also impose daily time limits and an opt-in to nonalgorithmic feeds for Facebook and Instagram users under 18. Of the total $17 billion amount, $5.3 billion is contingent on TikTok and YouTube reaching similar agreements.
"We believe youth engagement ceilings like these would actually be a larger headwind to YouTube than Meta," Nowak added, pointing out that the average user spends 73 minutes a day on YouTube. "We believe youth adoption of YouTube is higher" than it is for Facebook and Instagram, he added.
While investors continue to debate the return on investment of Meta's elevated AI spending, the company has undeniably utilized the technology to make more money off its core ad business.
"The latest few quarters showed us that AI is strengthening, rather than disrupting, the competitive position of the largest advertising platforms," Bernstein analyst Mark Shmulik wrote in a Monday note. AI is aiding in improved content recommendation, higher engagement as well as advanced ad targeting and delivery.
Meta could be the "biggest AI winner in digital ads," Shmulik said. "Excluding 'other' ad revenues including Maps and Gmail, we suspect Meta may already have caught up to Google search," he said. Shmulik expects Meta to officially pass Google search in ad revenue by the end of 2026 and to potentially overtake Google as a whole around 2030.
-Christine Ji