1 Growth Stock Down 25% to Buy Right Now

The market has been quite volatile this past week, and some stocks have been hit harder than others. One growth stock that has been slammed is Meta Platforms (NASDAQ: META), which is down more than 25% from its recent highs, as of this writing. The drop also wiped away most of the stock's gains over the past year.

The biggest reason for Meta's fall from grace is that investors think the company has a spending problem. And that is actually difficult to argue against. Meta has spent a boatload of money and piled up losses chasing founder and CEO Mark Zuckerberg's dream of the metaverse. The idea that people would spend time in a virtual world hanging out with friends or collaborating on work projects just has not taken hold, and there are really no signs that it will anytime soon.

The company's Reality Labs segment, which is also responsible for virtual reality headsets and smart glasses, has been losing billions of dollars every quarter. Over the past 12 months, the segment has had operating income losses of more than $18 billion. While the company's new Ray-Ban smart glasses have sold reasonably well, overall hardware prices are too high, and the technology is still not good enough.

Image source: Getty Images.

AI spending worries

Given the money Meta has thrown at the metaverse with nothing much to show for it, investors have become worried as the company ramps up its capital expenditures (capex) aimed at artificial intelligence (AI). Last quarter, the company upped the low end of its capex budget, taking it from a range of $114 billion to $118 billion, to a new range of $116 billion to $118 billion. What worried investors more, though, is that the company said that its capex would be significantly higher in 2026 and that expenses would also grow more quickly due to higher infrastructure costs, including added expenses related to cloud computing and depreciation.

Meta uses a hybrid strategy when it comes to AI infrastructure. It is investing heavily in building its own data center infrastructure to run its family of apps and train its Llama family of large language models (LLMs). This investment comes in the form of capex. These costs are not immediately expensed and are instead depreciated over the assets' useful lives. However, it also uses cloud computing services from third-party providers for things such as AI research and development. This is an ongoing expense that runs through its income statement during the period it occurs.

While worry about Meta's spending is understandable in light of its metaverse losses, the one big difference is that Meta's AI spending has been paying off. The company is using its Llama models to improve its content recommendation algorithms, which keeps users on its apps longer and leads to more ads being served per user. At the same time, it's also using AI to help advertising create better campaigns and improve targeting. This has helped to propel strong growth at Meta. Last quarter, its revenue climbed 26%, with ad impressions increasing 14% and ad prices up 10%.

Meta can also afford this spending. It generated about $107.6 billion in operating cash flow over the past 12 months, and nearly $45 billion in free cash flow. Its balance sheet is also in solid shape, with net cash of $15.6 billion. If it wants to front-load spending and take on some debt, it is also able to do that while staying in a strong financial position.

Time to buy the dip

With the decline in its stock price, Meta is now the cheapest of the AI megacap stocks, trading at a forward price-to-earnings ratio of under 19.5 times 2026 analyst estimates. The company is growing quickly, powered by AI, while it also has a big opportunity in front of it as it introduces ads to its popular message platform WhatsApp, which has 3 billion users, and its new social media platform Threads. Meanwhile, investors still have some hope that some of its more far-reaching bets, such as AI SuperIntelligence or the metaverse, could eventually pay off.

Between its valuation and opportunities in front of it, this is a growth stock you can buy while it's down.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.