Adding $META to our Watchlist

META stock is selling off with the ‘Magnificent 7’ today, now trading red on the year (just under a percent) and nearly -20% lower than it was a month ago.

And it has our attention.

With 3.3 billion daily active users and a massive investment in AI underway, is a compelling opportunity unfolding for long-term investors?

Perhaps.

LikeFolio data shows a bit of a loss in momentum on the social ad front in 2025 following a robust year last year. For us, this doesn't necessarily mean a negative ad print, just a slow down in growth.

Much of this is moderation is likely priced in. We've seen pretty much all ad names punished over the last quarter, especially second-tier social sites like Reddit and Snapchat. At this point, we may be entering overdone territory.

Especially when we consider META, specifically.

The parent of Instagram and Facebook (and WhatsApp, Threads, and Reels) is a best of breed name in social and advertising, and a classic example of how to leverage AI: social algorithm, conversational serach, and also ad buys and placements.

Its Instagram platform is a star, and what we see driving growth moving forward. Its Threads offshoot (of instagram) is also growing nicely, logging 28 million visits last month alone, though still too early for a YoY compare. Reels also feature more "positive" content vs. rival TikTok, impacting sentiment.

Last quarter, META shares moved higher on a nice report:

• Revenue and Profit Beat Expectations, but Q1 Guidance Misses the Mark: Q4 revenue rose 21% to $48.39 billion, and net income jumped 49% to $20.8 billion. EPS of $8.02 topped expectations of $6.77. Despite the strong quarter, Q1 revenue guidance of $39.5 billion to $41.8 billion landed below analyst estimates of $41.73 billion at the midpoint.

• AI Spending Ramps Up with Llama 4 and Meta AI Scaling Quickly: Meta plans to spend $60-$65 billion in capital expenditures in 2025, focused on AI infrastructure. The Meta AI chatbot has more than 700 million monthly active users, up from 600 million in December. Zuckerberg expects it to reach 1 billion this year. Meta continues pushing its Llama 4 open-source AI model as a key alternative to closed systems from OpenAI and Google.

• User Growth Driven by Instagram, WhatsApp, and Reels: Daily active users across Meta’s platforms grew to 3.35 billion, above projections. Instagram and Facebook Reels saw increased engagement, with video time spent rising at a double-digit rate in the U.S. WhatsApp crossed 100 million monthly active users in the U.S., a step toward gaining traction in a market where it has lagged.

• Reality Labs Drains Cash, but AI Glasses Show Promise: The Reality Labs division reported a $5 billion operating loss. While the metaverse business remains a drag, early demand for Ray-Ban Meta AI glasses suggests wearable AI could become a meaningful product category.

• Ad Revenue Climbs as AI-Powered Tools Boost Performance: Advertising revenue reached $46.8 billion, up 21% year-over-year, with stronger pricing and advertiser demand driving growth. AI-powered Advantage+ shopping campaigns, now at a $20 billion annual run rate, continue expanding. Ads are being tested on Threads, but Meta does not expect material revenue from the platform this year.

Bottom line: META’s earnings showed strong financial performance and heavy investment in AI, but weak Q1 guidance kept enthusiasm in check. Reality Labs remains a financial drag, but Meta is betting that AI-driven products will drive long-term growth. We see overperformance in its Instagram brand and promise in Reels and Threads. The market has been weary of ad-driven sales in 2025 after a hot 2024 (presidential election, olympics, etc.) but META is THE leader in this space.

Could be nearing an entry opp here — we’re getting close to oversold territory.

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