Meta just reminded Wall Street it still has some rocket fuel left. After weeks of wobbling, the stock ripped higher and—thanks to a still-low valuation for a MAG7 name—the “can it close that earnings gap?” chatter is back.
Meta rebounded smartly to start the week, outpacing much of big tech and trimming the damage from its late-October plunge. Even after the bounce, the stock’s year-to-date total return is only around the high single digits—well behind several MAG7 peers—which is partly why value hunters keep circling.
That plunge, of course, began with Q3 results on Oct. 29. Revenue hit a record $51.2B (+26% y/y), but GAAP EPS cratered to $1.05 because of a one-time, non-cash $15.9B tax charge tied to the new U.S. tax regime. Management explicitly said that without the charge, EPS would have been $7.25—and future cash taxes should fall. The market didn’t wait for footnotes; it sold first.
Meta then layered on financing news: a $30B multi-tranche bond sale, its biggest ever, to help fund AI infrastructure. Useful for flexibility, yes—also a reminder that capex is enormous and rising.
Three forces powered the latest pop.
1) “Cheapest of the Seven” narrative. After the pullback, Meta’s forward P/E slipped into the low-20s—toward the bottom of the MAG7 range—which tends to attract buyers when the tape steadies. Several rundowns now peg Meta near ~20–24x forward earnings.
2) The fundamentals weren’t broken. The business is still growing quickly. Meta guided Q4 revenue to $56–$59B, and user engagement remains massive (3.5B+ daily across the family of apps). The controversy is less about demand and more about the timing/return on those giant AI outlays.
3) Technical magnetism. Chart watchers have been eyeing a post-earnings gap zone around $600. As momentum improved, the idea of “gap fill first, questions later” gained traction.
If you’re trying to handicap whether Meta can finish that earnings-gap climb and keep going, here’s a simple framework:
• Scoreboard vs. spend. The Q3 headline miss was accounting, not operations, but the spending is very real. Watch updates on 2025 capex (last guided $70–$72B) and any early signals on 2026 expenses; those were key reasons the stock sank after earnings. If capex discipline improves—or ROI proof points show up—multiple pressure eases.
• Financing follow-through. The $30B bonds priced smoothly, showing appetite for Meta paper. But the broader “AI bond wave” is huge; if credit markets wobble, funding costs for long-duration data-center bets can creep up. Keep an eye on spreads.
• Valuation leash. Low-20s forward P/E gives a little room for error, but not a hall pass. The market will want to see ad-revenue resilience, clear Gemini/AI-driven engagement lift, and steady Reels monetization—without margin air leaks.
• Levels that matter. On the upside, reclaiming and holding above the $600 gap area keeps the repair job alive; lose it convincingly and technicians will warn about deeper gap targets below. Either way, price will follow delivery.
Bottom line: Meta’s bounce wasn’t magic—it was arithmetic. A still-growing ad machine at a below-peer multiple, plus a market that finally exhaled, equals buyers testing the water. Whether the stock fully closes the post-earnings gap and extends higher comes down to one thing: proof that the eye-watering AI spend turns into sticky revenue and durable margins.
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