Investment Thesis
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Meta (NASDAQ:META) currently have a Valuation that appears to be appealing for investors. Alphabet's P/E [FWD] Ratio stands at 22.75 while Meta's is even lower (20.74).
However, I believe that Alphabet is clearly the more attractive choice for investors in comparison to Meta when investing over the long term.
In the following, I will summarize why I believe Alphabet is superior to Meta in terms of risk and reward:
- Alphabet has stronger financial health than Meta: while Alphabet has a Total Cash Position of $115.10B, Meta's stands at $37.44B.
- I see Alphabet as being ahead of Meta when it comes to Profitability: the company has a higher Return on Equity (22.76% when compared to 17.29%) and a higher Net Income Margin (20.58% compared to 18.27%).
- I think Alphabet is superior to Meta when it comes to Growth: Alphabet's Revenue Growth Rate [FWD] is 9.00% while Meta's is 5.82%.
- At the companies' current price levels, my DCF Model indicates an Internal Rate of Return of 9% for Alphabet and 8% for Meta, thus indicating that the reward should be higher for Alphabet investors.
- In addition to that, I consider the risk factors for Alphabet investors to be lower than for those who invest in Meta. This is also reflected in Alphabet's 24M Beta Factor of 1.22, which is below Meta's (1.32).
- I believe that Alphabet has a higher economic moat when compared to Meta, to which Alphabet's higher brand value and stronger financial health have contributed.
- While Alphabet receives my strong buy rating, Meta only receives my hold rating at its current price level.
- Furthermore, I recommend overweighting the Alphabet stock in a long-term investment portfolio while I recommend underweighting the Meta stock.
The Companies' Competitive Position within their Industry
Both Alphabet and Meta have a strong competitive position within the Interactive Media and Services Industry, which is reflected in their high EBIT Margins: while Alphabet's is 25.35%, Meta's is 28.46%.
However, I believe that Alphabet has even stronger competitive advantages than Meta, which I will now discuss in more detail.
While Alphabet maintained the third position in the ranking of the most valuable brands in the world according to Brand Finance (with an estimated brand value of $281,382M), Meta is listed 14th (it was ranked 7th in 2022). In my opinion, Alphabet's higher brand value reflects the company's stronger competitive position when compared to its rival.
In addition, I see Alphabet as being financially stronger than Meta: the reason for that is Alphabet's current Total Cash Position of $115.10B when compared to Meta's ($37.44B). Furthermore, it can be highlighted that Alphabet has a slightly better credit rating than its competitor: while Alphabet has an Aa2 credit rating from Moody's, Meta's is A1, once again confirming Alphabet's financial superiority.
I believe that Alphabet and Meta have collected an enormous amount of data within the past decade, which will help them to maintain a strong competitive position within their industry.
However, I believe that Alphabet's economic moat is even stronger than Meta's. This opinion is particularly based on the fact that Alphabet has a higher brand value and possesses even stronger financial health than Meta.
Alphabet's stronger competitive position is one of the reasons why I suggest overweighting its stock in an investment portfolio while I suggest to underweight the Meta stock.
The Companies' Valuation
Alphabet currently has the higher P/E [FWD] Ratio when compared to Meta: while Alphabet's P/E [FWD] Ratio stands at 22.75, Meta's is at 20.74. In addition to that, it can be highlighted that Alphabet's Price / Sales [TTM] Ratio lies slightly above the one of Meta: Alphabet's Price / Sales [TTM] Ratio is 5.50 while Meta's is 5.48.
Discounted Cash Flow Model for Alphabet
My DCF Model indicates an intrinsic value of $115.18 for Alphabet. At the company's current stock price of $121, this implies a downside of 4.8%.
Internal Rate of Return for Alphabet
Below you can find the calculations of the Internal Rate of Return for Alphabet when assuming different purchase prices for the company's stock. At Alphabet's current stock price of $121, my DCF Model indicates an Internal Rate of Return of 9% for the company.
Purchase Price of the Alphabet Stock Internal Rate of Return as according to my DCF Model $100.00 15% $105.00 13% $110.00 12% $115.00 11% $120.00 10% $121.00 9% $125.00 9% $130.00 8% $135.00 7% $140.00 6% $145.00 5%
Source: The Author
Discounted Cash Flow Model for Meta
My DCF Model currently shows an intrinsic value of $220.24 for Meta. At the company's current stock price of $247, this implies a downside of 10.8%.
Internal Rate of Return for Meta
Below you can find the Internal Rate of Return for Meta when assuming different purchase prices for the company's stock. At Meta's current price level of $247, my DCF Model indicates an Internal Rate of Return of 8%.
Purchase Price of the Meta Stock Internal Rate of Return as according to my DCF Model $225.00 11% $230.00 10% $235.00 10% $240.00 9% $245.00 9% $247.00 8% $250.00 8% $255.00 8% $260.00 7% $265.00 7% $270.00 6%
Source: The Author
At the companies' current stock prices of $121 (Alphabet) and $247 (Meta), my DCF Models indicate an Internal Rate of Return of 9% for Alphabet and 8% for Meta, thus strengthening my confidence in selecting Alphabet over its competitor.
The Companies' Profitability
In terms of Profitability, I believe that Alphabet is ahead of Meta. There are a variety of metrics that support this theory. Alphabet has a higher Return on Equity when compared to Meta: while Alphabet's Return on Equity stands at 22.76%, Meta's is 17.29%.
The same is confirmed when taking a look at the companies' Return on Assets: while Alphabet's is 17.47%, Meta's is 15.37%. In addition to that, Alphabet's Net Income Margin of 20.58% stands above the one of Meta (18.27%).
All of these metrics support my theory that Alphabet is superior to Meta when it comes to Profitability and has contributed to my decision to select the company over its competitor.
The Companies' Growth Perspectives
In terms of Growth, I also believe that Alphabet is in front of Meta: Alphabet's Revenue Growth Rate [CAGR] over the past 3 years is at 19.53% while Meta's is at 16.95%.
In addition to that, it can be highlighted that both Alphabet's Revenue Growth Rate [FWD] (9.00% when compared to Meta's of 5.81%) and its Revenue Growth Rate [YoY] (5.28% compared to -1.94%) are higher than Meta's.
Furthermore, Alphabet's EBIT Growth Rate [CAGR] over the past 3 years is clearly above the one of Meta. This indicates that Alphabet has increased its profits at higher growth rates than its rival: while Alphabet's 3 Year EBIT Growth Rate [CAGR] is 25.91%, Meta's is significantly lower (5.36%).
Alphabet's superiority in terms of Growth is further confirmed when taking into consideration the EPS Diluted Growth Rate [CAGR] of both companies over the past 3 years: while Alphabet's is 21.97%, Meta's is 3.38%.
Risk Factors
In terms of risks, I believe that Alphabet is the company that comes with less risks attached.
Alphabet has a higher Total Cash Position (115.10B compared to Meta's, which is 37.44B) and a lower Total Debt to Equity Ratio (11.30% compared to 22.65%). Both of these factors indicate that Alphabet is the lower risk investment between the two picks.
This is further confirmed when looking at the companies' Beta Factors: while Alphabet's 24M and 60M Beta Factor are 1.22 and 1.10, Meta's are 1.32 and 1.20 respectively. This once again confirms my theory that Alphabet is the company with the lower risk factors attached.
Alphabet's higher brand value further contributes to the fact that I believe it's the lower risk investment when compared to Meta.
In addition to that, it can be highlighted that Alphabet has a Free Cash Flow Yield [TTM] of 3.95% while Meta's is 2.68%. This serves as an additional indicator that an investment in Alphabet comes with less risks attached compared to an investment in Meta.
Furthermore, I would like to add that Alphabet's Current Ratio (2.35 compared to 2.07) and its Quick Ratio (2.20 compared to 1.91) are superior to Meta's, once again confirming my investment thesis.
My opinion to consider Alphabet as the lower risk investment has contributed significantly to the fact that I suggest overweighting Alphabet in a long-term investment portfolio while I would only underweight the Meta stock.
Conclusion
There are a variety of reasons why I believe that Alphabet is currently the more attractive pick for investors when compared to its competitor Meta.
First, Alphabet is ahead of Meta when it comes to Profitability, which is underlined by the company's higher Return on Equity (22.76% when compared to 17.29%).
Second, I believe that Alphabet is superior to Meta when it comes to Growth: Alphabet's Revenue Growth Rate [FWD] stands at 9.00% while Meta's is 5.82%.
Third, I believe that Alphabet has a higher economic moat than its rival (to which its higher brand value and stronger financials have contributed).
Fourth, Alphabet has a significantly higher Total Cash Position when compared to Meta: Alphabet's Total Cash Position stands at $115.10B while Meta's is $37.44B.
Fifth, I believe that the risk factors are lower for Alphabet investors than for Meta investors: while Alphabet's 24M Beta Factor is 1.22, Meta's is 1.32.
Sixth, my DCF Models indicate an Internal Rate of Return of 9% for Alphabet and 8% for Meta. Thus demonstrating that the reward for Alphabet investors should be superior in comparison to Meta investors.
Summarizing, I believe that Alphabet is the better pick when compared to Meta in terms of risk and reward, which has contributed to the fact that Alphabet receives my strong buy rating while Meta receives my hold rating.
In addition to that, it has led me to recommend overweighting the Alphabet stock in an investment portfolio while underweighting the Meta stock.
Author's Note: Thank you for reading! I would appreciate hearing your opinion on this comparative analysis on Alphabet and Meta. Do you own any of these companies or plan to acquire them?
This article was written by
Frederik Mueller
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In my analyses, I aim to identify companies that have strong competitive advantages over their competitors (for example, a strong brand image, cost advantages, special know how, strong pricing power, a strong distribution network, etc.) in order to support you to find excellent long-term investments. I aspire to help you build an investment portfolio consisting of high-quality companies that are particularly attractive in terms of risk and reward (for example, due to their wide economic moat, high financial strength, high profitability, attractive valuation, growth potential and expected return). I was born in Germany and majored in Business Administration at the University of Mannheim (Germany) and San Diego State University (United States).
Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG, META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
FAQs
Google Vs. Meta: Which Is The Better Choice For Investors? ›
Both of these FAANG stocks will likely recover if a new bull market starts, but Alphabet's stronger growth, lower valuations, and commitment to the cloud instead of the metaverse make it a better overall investment than Meta right now.
Is Meta a good stock to buy? ›Meta Platforms currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
Is Meta a good stock to buy 2023? ›It is one of the best growth stocks to buy in 2023 according to Rajiv Jain. On April 26, Meta Platforms, Inc. (NASDAQ:META) reported Q1 GAAP earnings per share of $2.20 and a revenue of $28.65 billion, outperforming Wall Street estimates by $0.23 and $990 million, respectively.
What companies are best to invest in the Metaverse? ›- Nvidia (NVDA)
- Autodesk (ADSK)
- Matterport (MTTR)
- Unity Software (U)
- ROBO Global Artificial Intelligence ETF (THNQ)
- Roblox (RBLX)
- Meta Platforms Inc. (META)
- Roblox Corp. (RBLX)
- Nvidia Corp. (NVDA)
- Unity Software Inc. (U)
- Microsoft Corp. (MSFT)
- Adobe Inc. (ADBE)
- Autodesk Inc. (ADSK)
It's not too late to invest in Meta Platforms
Meta shares are no longer the absolute steal they were at the beginning of the year, but they still trade at levels that leave room for long-term investors to see strong returns.
Google Stock Forecast FAQ
The consensus among 22 Wall Street analysts covering (NASDAQ: GOOGL) stock is to Strong Buy GOOGL stock.
Long-term projections have Meta at $272 by the end of 2022 and $360 by the end of 2023. Meta stock will hit $470 in 2025, $580 in 2027, and $765 in 2030, with further gains expected thereafter.
Is META a buy sell or hold? ›Is META a Buy, Sell or Hold? Meta Platforms has a conensus rating of Strong Buy which is based on 38 buy ratings, 5 hold ratings and 0 sell ratings.
What will Google stock be worth in 2025? ›
According to the latest long-term forecast, Google price will hit $125 by the end of 2023 and then $150 by the middle of 2024. Google will rise to $200 within the year of 2025, $250 in 2027, $300 in 2029 and $350 in 2032.
What will Google stock be worth in 2030? ›What will the GOOGL price be in 5 years and 10 years – forecast by years. According to the Traders Union long-term price forecast Google (GOOGL) can reach $407.75 by 2025, $2083.22 by 2030, $3583.24 by 2034.
What will Google stock be worth in 2 years? ›Google share price forecast: Analysts' projections
Analysts estimate it could rise to $219 within the year of 2025, and was anticipated to reach $252 in 2026, $302 in 2029 and $362 in 2033.
The main difference between GOOGL and GOOG that you must know is that GOOGL shares give you voting rights while GOOG doesn't. Alphabet's Class A stocks (GOOGL) come with voting rights while the Class C stocks (GOOG) do not. Because of this difference, GOOG tends to trade at a slight discount compared to GOOGL.
What will Google stock be worth in 5 years? ›| Year | Minimum Price | Maximum Price |
|---|---|---|
| 2023 | $92 | $135 |
| 2024 | $105 | $150 |
| 2025 | $115 | $170 |
| 2026 | $121 | $205 |
Google is investing extensively in the advancement of the metaverse, particularly in the realms of VR and AR teams, and the development of a shared virtual reality space. Google made its first major investments in the metaverse in January 2022.
What is the next big thing in the stock market? ›The hottest sector in the stock market right now is Artificial Intelligence or AI for short. This futuristic technology is fascinating to many and whether we like it or not, it will change our lives. Much like cryptocurrency over the last few years, investors cannot get enough of the opportunity that awaits.
Who is leading in metaverse technology? ›By improving AltspaceVR to make Metaverse Technology a safer environment for users and participants, Microsoft is one of the leading developers of the Metaverse. On the Mesh platform, Microsoft is a well-known Meta business that is creating a variety of Metaverse goods.
Does Meta stock have a future? ›Where could Meta's stock be in 2030? For now, analysts expect Meta's revenue to rise 5% in 2023 and grow 12% to $136.3 billion in 2024. Its net income is expected to decline 11% in 2023 as it ramps up its spending, but increase 20% to $26.2 billion in 2024.
Is there any future for Meta stock? ›Stock Price Forecast
The 52 analysts offering 12-month price forecasts for Meta Platforms Inc have a median target of 280.00, with a high estimate of 350.00 and a low estimate of 100.00. The median estimate represents a -0.44% decrease from the last price of 281.23.
Can you make money from Meta? ›
The metaverse offers opportunities for investors and gamers. Investors can sell NFTs for a profit, and gamers can play to earn. You might want to hold an event and sell tickets or rent metaverse real estate. For long-term earning, consider a job in the metaverse industry.
What will Facebook Meta price be in 2030? ›According to the Traders Union long-term price forecast Facebook (META) can reach $834.01 by 2025, $4261.03 by 2030, $7329.17 by 2034.
Can you invest in Meta Facebook? ›Investing in Meta (formerly Facebook) requires a few steps. You'll need a brokerage account, an investing plan and a budget. Elizabeth Ayoola is a NerdWallet personal finance writer.
What is a bear and bull market? ›The commonly accepted definition of a bull market is when stock prices rise by 20%. Traders employ a variety of strategies, such as increased buy and hold and retracement, to profit off bull markets. The opposite of a bull market is a bear market, when prices trend downward.
Does Google stock have a future? ›Stock Price Forecast
The 47 analysts offering 12-month price forecasts for Alphabet Inc have a median target of 130.00, with a high estimate of 190.32 and a low estimate of 100.00.
As of 2023-06-17, the Fair Value of Alphabet Inc (GOOGL) is 120.38 USD. This value is based on the Peter Lynch's Fair Value formula. With the current market price of 123.53 USD, the upside of Alphabet Inc is -2.5%.
Which Google is better to invest in? ›Because GOOGL shares have voting rights, and because these rights have some value, they often trade at a slight premium. In reality, GOOG and GOOGL often trade for just around the same price.
Will Meta stock recover in 2023? ›There are 35 analysts that are projecting META will produce $9.29 of EPS in 2023, and 32 analysts have provided 11.35 in EPS as guidance for 2024. This places META's current P/E at 25.04 and its forward P/E at 23.26 using the 2023 guidance and 19.03 using the 2024 forward guidance.
What was the highest meta stock price ever? ›The all-time high Meta Platforms stock closing price was 382.18 on September 07, 2021. The Meta Platforms 52-week high stock price is 276.57, which is 1.2% above the current share price.
Will Meta rise again? ›From a sales perspective, Meta has been pretty much running in place for the past year, but it appears to be gaining traction. Analysts expect sales growth of 5% for the full year and 11% in 2024. With Meta cutting jobs and spending, those revenue gains should translate into strong earnings growth.
What is the META forecast for 2023? ›
We expect second quarter 2023 total revenue to be in the range of $29.5-32 billion. Our guidance assumes foreign currency headwinds will be less than 1% to year-over-year total revenue growth in the second quarter, based on current exchange rates.
What is the price of META stock in 2023? ›After peaking at 379.38 U.S. dollars per share in August 2021, the price of Meta shares started to decrease, reaching 264.72 U.S. dollars as of the end of May 2023.
How low will META stock go? ›According to estimates from MarketBeat, as of 2 November 2022, the analysts set an average META stock price target at $170.93 a share. The highest 12-month Meta Platforms share price forecast from analysts was $375 and the lowest was $80.
Can Google stock reach $1,000? ›Even while it will take a while, It's almost certain to happen based on the facts we now have. In between 2042 to 2045, the value of google stock is predicted to be $1000.
What will the price of Google be in 2040? ›Due to the enormous growth of the stock market, the price of Google in 2040 may reach a new all-time high. Moreover, its price may range from as low as $163 to as high as $170. So, the average price of Google stock should be $168.
Will Google reach $5,000? ›After the analysis of all the aspects of Google stock, we can say that it will take as long as three decades to reach the $5000 mark. If you are looking for long-term investment then this is the time for you to think about Google stocks, which are looking way more prominent than any other stocks in the market.
Where will Google be in 10 years? ›In the next decade, Alphabet should deliver faster revenue growth than what the market currently expects, thanks to AI-related growth opportunities for Google Search and Google Cloud. The sell-side sees Google's revenue growing by a 10-year CAGR of +8.5% from $282.8 billion in FY 2022 to $641.9 billion for FY 2032.
Does Google pay a dividend? ›It stated in its most recent 10-K from early 2022 that it has no plans to pay a dividend for the foreseeable future. In its 10-K from 2022, Alphabet states that it hasn't paid a dividend since going public and continues: “The primary use of capital continues to be to invest for the long-term growth of the business.
Where will Apple stock be in 10 years? ›It was projected that Apple's share price would reach $220 by the end of 2023, $250 in 2024, $315 in 2025, $370 in 2026, $425 in 2027, $465 in 2028, and $480 in 2029. In 2030, analysts anticipate Apple shares will be worth $510.
Is Alphabet stock a good stock? ›Fair Value Estimate for Alphabet
At a 4-star rating, we believe Alphabet stock is undervalued when compared with our fair value estimate.
What is the future of Alphabet stock? ›
Stock Price Forecast
The 48 analysts offering 12-month price forecasts for Alphabet Inc have a median target of 130.00, with a high estimate of 190.32 and a low estimate of 100.00. The median estimate represents a +5.20% increase from the last price of 123.58.
Is META a Buy, Sell or Hold? Meta Platforms has a conensus rating of Strong Buy which is based on 38 buy ratings, 5 hold ratings and 0 sell ratings.
Is Google a good stock to buy 2023? ›Google Stock Forecast FAQ
Is Google Stock a good buy in 2023, according to Wall Street analysts? The consensus among 22 Wall Street analysts covering (NASDAQ: GOOGL) stock is to Strong Buy GOOGL stock.
If the current performance trend continues, it's possible that Google's stock could reach $500 in the next 10 years. However, the potential for big gains depends on the type of investment strategy one chooses – whether it's a long-term or short-term approach.
Where will Alphabet stock be in 5 years? ›As of 30 May, according to Coin Price Forecast, Alphabet price could hit $155 by the end of 2023 and then might reach $163 by the end of 2024. Analysts estimate it could rise to $219 within the year of 2025, and was anticipated to reach $252 in 2026, $302 in 2029 and $362 in 2033.
How high will Alphabet stock go? ›Stock Price Forecast
The 47 analysts offering 12-month price forecasts for Alphabet Inc have a median target of 130.00, with a high estimate of 190.32 and a low estimate of 100.00. The median estimate represents a +4.26% increase from the last price of 124.69.
Alphabet Inc Class has a volatility of 1.73 and is 2.19 times more volatile than NYSE Composite. 15 of all equities and portfolios are less risky than Alphabet.
What will Alphabet stock price be in 2027? ›Google (Alphabet) Stock Price Prediction 2027
Experts predict that Alphabet's (GOOG) stock will be worth $419.93 in 2027. By the middle of 2027, Google stock will be at $449.32, and by the end of the year, it will be at $480.78.
Risk Factors To Google Stock Forecast. So, as we can see, a $5,000 per share valuation for Google by 2025 isn't out of the picture. But there are a few roadblocks that could hamper that process. First, the ever-present regulatory risk facing a company as powerful as Google can never be discounted.
What is a fair price for Alphabet stock? ›As of 2023-06-19, the Fair Value of Alphabet Inc (GOOGL) is 120.38 USD. This value is based on the Peter Lynch's Fair Value formula. With the current market price of 123.53 USD, the upside of Alphabet Inc is -2.5%.
Where will Meta be in 5 years? ›
Long-term projections have Meta at $272 by the end of 2022 and $360 by the end of 2023. Meta stock will hit $470 in 2025, $580 in 2027, and $765 in 2030, with further gains expected thereafter.
How low will Meta stock go? ›According to estimates from MarketBeat, as of 2 November 2022, the analysts set an average META stock price target at $170.93 a share. The highest 12-month Meta Platforms share price forecast from analysts was $375 and the lowest was $80.
What is the meta stock price prediction for 2023? ›There are 35 analysts that are projecting META will produce $9.29 of EPS in 2023, and 32 analysts have provided 11.35 in EPS as guidance for 2024. This places META's current P/E at 25.04 and its forward P/E at 23.26 using the 2023 guidance and 19.03 using the 2024 forward guidance.