Meta Platforms (NASDAQ:META) and Alphabet (NASDAQ:GOOG) Critical Review

Alphabet (NASDAQ:GOOG) and Meta Platforms (NASDAQ:META) are both large-cap communication services companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, analyst recommendations, profitability, risk and dividends.

Profitability

This table compares Alphabet and Meta Platforms’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alphabet	50.03%	46.63%	31.83%
Meta Platforms	31.15%	30.73%	18.08%

Insider and Institutional Ownership

27.3% of Alphabet shares are owned by institutional investors. Comparatively, 79.9% of Meta Platforms shares are owned by institutional investors. 13.0% of Alphabet shares are owned by insiders. Comparatively, 13.5% of Meta Platforms shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Alphabet and Meta Platforms, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alphabet	1	5	35	6	2.98
Meta Platforms	0	7	47	3	2.93

Alphabet presently has a consensus target price of $413.38, indicating a potential upside of 48.68%. Meta Platforms has a consensus target price of $833.12, indicating a potential upside of 37.31%. Given Alphabet’s stronger consensus rating and higher probable upside, equities analysts clearly believe Alphabet is more favorable than Meta Platforms.

Risk & Volatility

Alphabet has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500. Comparatively, Meta Platforms has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500.

Valuation and Earnings

This table compares Alphabet and Meta Platforms”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alphabet	$402.84 billion	8.44	$132.17 billion	$19.16	14.51
Meta Platforms	$200.97 billion	7.69	$60.46 billion	$29.33	20.69

Alphabet has higher revenue and earnings than Meta Platforms. Alphabet is trading at a lower price-to-earnings ratio than Meta Platforms, indicating that it is currently the more affordable of the two stocks.

Dividends

Alphabet pays an annual dividend of $0.88 per share and has a dividend yield of 0.3%. Meta Platforms pays an annual dividend of $2.10 per share and has a dividend yield of 0.3%. Alphabet pays out 4.6% of its earnings in the form of a dividend. Meta Platforms pays out 7.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Alphabet has raised its dividend for 1 consecutive years and Meta Platforms has raised its dividend for 1 consecutive years.

Summary

Alphabet beats Meta Platforms on 10 of the 16 factors compared between the two stocks.

About Alphabet

Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube. It is also involved in the sale of apps and in-app purchases and digital content in the Google Play and YouTube; and devices, as well as in the provision of YouTube consumer subscription services. The Google Cloud segment offers infrastructure, cybersecurity, databases, analytics, AI, and other services; Google Workspace that include cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and other services for enterprise customers. The Other Bets segment sells healthcare-related and internet services. The company was incorporated in 1998 and is headquartered in Mountain View, California.

About Meta Platforms

Meta Platforms, Inc. engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs. The Family of Apps segment offers Facebook, which enables people to share, discuss, discover, and connect with interests; Instagram, a community for sharing photos, videos, and private messages, as well as feed, stories, reels, video, live, and shops; Messenger, a messaging application for people to connect with friends, family, communities, and businesses across platforms and devices through text, audio, and video calls; and WhatsApp, a messaging application that is used by people and businesses to communicate and transact privately. The Reality Labs segment provides augmented and virtual reality related products comprising consumer hardware, software, and content that help people feel connected, anytime, and anywhere. The company was formerly known as Facebook, Inc. and changed its name to Meta Platforms, Inc. in October 2021. The company was incorporated in 2004 and is headquartered in Menlo Park, California