Yahoo Finance Meta vs. Alphabet Stock: Which Is a Better Investment?
For much of 2023, you couldn’t even glace sideways at a media source without mention of the so-called “Magnificent Seven” stocks. While some of the shine has come off the group as a whole during the first half of 2024, they are still among the best stocks to watch on the stock market today due to their oversized market capitalizations.
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The Magnificent Seven stocks — Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) — still dominate today’s financial news after driving the S&P 500 in 2023. They account for about half of the weighting of the Nasdaq index, which is loaded with market-cap, tech-heavy companies.
You could easily buy stock in all Magnificent Seven stocks in one fell swoop by investing in funds like the Vanguard Growth EFT or Mega Cap Growth EFT, which include high percentages of the U.S. megacap stocks. However, if you’re looking to cash in by owning stock in one of the seven, and are trying to decide between investing in like Alphabet Inc. (Google’s parent company) or Meta Platforms Inc. (the owner of Facebook and Instagram), here are some things that may sway your decision.
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Should I Invest in Alphabet or Meta?
As The Motley Fool notes, tech behemoths Meta Platforms (NASDAQ: META) and Alphabet (NASDAQ: GOOGL) are fairly similar: both businesses rule their respective industries by making excellent products, both initiated dividends for the first time this year and both make a killing generating enormous amounts of revenue money through digital advertising.
When dissecting two companies of this size, it’s really easy to sit on the fence. If you believe in the potential of the metaverse and are willing to take on higher risk for potentially higher rewards, Meta might be the better choice. If you prefer a more diversified company with steady revenue from various sources, Alphabet could be a more stable investment.
However, while both companies have vast growth potential and are poised to continue to change the world as we know it from a technological perspective, they differ in the details, and evaluating the direction in which each company may move in the future many dictate where you want to place your hard earneds.
Trading in internet search engines, cloud infrastructure, entertainment, media, advertising, consumer electronics and mobile operating systems, Alphabet’s main sources of income are YouTube and Google, the world’s leaders in internet searching and online video content searching, respectively.
It’s net worth — or market cap — is $2.175 trillion today, up nearly 40% year-over-year, per Stock Analysis. And Google stock has beaten its earnings per share (EPS) and sales estimates 100% of the time in the past year, according to TipRanks, making it a “strong buy.” Of the 38 analysts giving stock ratings, only five have the company’s stock as a hold (none have it as a sell).
Writing for The Motley Fool, Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark, feels her brother’s company is in a better position than Alphabet to take advantage of the forthcoming AI frontier.
Providing the world with social media apps like Facebook, Instagram and WhatsApp, Meta Platform’s core earnings drivers are in advertising, the metaverse, consumer electronics and social media. Meta isn’t worth as much as Alphabet, but it’s still got a very well-lined purse.
It’s now ranked as the seventh largest company in the world, with a market cap of $1.260 trillion. According to Investors.com, on April 24, Meta beat analyst expectations by $0.39 in earnings per share ($4.71 to $4.32) and although its executives provided a lighter-than-expected sales forecast for the current quarter, Meta stock remains a good, but maybe not a great, buy. Morningstar thinks it should be selling at $400 per share as opposed to hovering around its current $432 price (Alphabet is ~$176 USD today).
Ms. Zuckerberg is correct about Meta’s favorable position moving forward and Mark is bullish about investing in AI. Meta’s audience is found primarily on Facebook, and in December, the company reported a daily user figure of 2.11 billion and a monthly active user number of 3.07 billion. “Few companies, of any sort, can boast of audience numbers on this scale,” said TipRanks.
But with users comes competition, and if more people — especially legions of young influential people — spend more time on apps like TikTok, it may come at the expense of people spending time on Facebook or Instagram. Meta will always be fighting for user time and advertising money.
Additionally, any hard regulatory limitations or rule changes on how user data can be utilized could turn an audience away. Google’s plan to phase out cookies for 100% of Chrome users by Q3 2024 is already underway and will significantly change the ad strategies of companies that use them, including Meta’s big platforms.
Meanwhile, Alphabet’s non-internet search AI subsidiaries — besides the fiasco-filled launch of Gemini — have already been met with positive reviews. Waymo, the company’s autonomous vehicle has already put self-driving cars on the streets of San Francisco. Alphabet has also developed encouraging Large Language Models (LLMs) that will have far reaching applications for “thousands of small and medium-sized businesses,” according to Laura Martin of Needham & Company. “Generative AI requires a constant inflow of millions of data points each day to keep an LLM up to date, and GOOGL ingests more data than its competitors, thanks to Search and YouTube,” Martin explained.
If you are a hedge bettor, both companies’ AI investment and election year ad spending is going to go through roof, barring a major economic downturn, and both are sound investments. But thinking ahead, Alphabet is a stronger buy of the two. It is cheaper, has healthier consensus upsides and is getting all its sources homed in on the AI revolution better than many of its Magnificent Seven rivals, including Meta.
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This article originally appeared on GOBankingRates.com: Meta vs. Alphabet Stock: Which Is a Better Investment?
