Investors committed to long-term growth typically seek to identify companies with strong fundamentals and purchase their stock at prices considered reasonable, enabling gains to compound gradually. However, in a market marked by escalating valuations for leading growth stocks, especially after three consecutive years of S&P 500 returns exceeding 15%, finding attractively priced quality stocks can be challenging.
Although some market leaders may justify their premium valuations through continued expansion, investors aiming for valuations below the broader market average often need to look beyond prominent technology and artificial intelligence companies. In this context, two enterprises stand out for their value and quality: Meta Platforms and Walt Disney.
Meta Platforms: An Advertising Powerhouse with Margin Strength
Meta Platforms primarily generates revenue through advertising on its suite of social media applications, including Instagram, Facebook, WhatsApp, and Messenger, collectively referred to as the Family of Apps. For the third quarter ending September 30, 2025, this division reported $50.08 billion in advertising revenue alongside $24.97 billion in operating income, reflecting an operating margin of 49.9%. Such profitability signifies an exceptionally efficient business model.
To illustrate the strength of Meta’s operating performance, comparisons can be drawn to Alphabet’s Google Services segment, which encompasses Google Search, YouTube advertisements, the Google Network, subscriptions, and devices. Over the same quarter, Google Services earned $87.05 billion in revenue and $33.53 billion in operating income, equating to a 38.5% operating margin. Meta’s higher margin underscores its operational efficiency in monetizing its user base.
Meta has successfully increased user engagement by enhancing its short-form video offerings and refining targeted advertising methods, reinforcing its status as a preferred platform for advertising expenditures. Despite such strong operational metrics, Meta stock has experienced a 12.6% decline over the past six months, contrasting with an 11.2% increase in the S&P 500 index, raising questions about investor sentiment.
The underlying factors influencing investor hesitation include Meta’s significant commitments beyond its core Family of Apps. Particularly, Reality Labs, a division focused on metaverse technologies and virtual and augmented reality hardware, has posted substantial losses. Through the first nine months of 2025, Reality Labs reported an operating loss of $13.17 billion.
This unit encompasses projects such as the Meta Quest VR headset, Ray-Ban Meta smart glasses, AI research initiatives, and a variety of virtual and augmented reality developments. Functioning largely as an extensive and currently unprofitable research and development arm, Reality Labs represents a significant financial drain, albeit one that the company can support due to the profitability of its primary platforms.
Furthermore, Meta is increasing expenditure in artificial intelligence and data infrastructure as it deploys AI capabilities throughout its product ecosystem and advances its Llama 4 AI models. This commitment has led to an upward revision in 2025 capital expenditure guidance to a range between $70 billion and $72 billion, compared to $66 billion to $72 billion previously and $32.04 billion spent in 2022.
Despite these substantial outlays, Meta maintains robust cash flow and operating margins, allowing it to invest aggressively in future technologies. Its current forward earnings multiple positions it as the most reasonably valued among the prominent technology firms often dubbed the “Magnificent Seven,” and notably, the only one trading at a discount relative to the S&P 500.
Walt Disney: Renewed Creative Success and a Diverse Growth Platform
Walt Disney has recently demonstrated renewed creative and financial momentum. Its animated film "Zootopia 2" surpassed "Frozen 2" to become the highest-grossing release from Walt Disney Animation Studios, accumulating $1.46 billion in global box office revenue by the end of 2025.
This resurgence challenges earlier perceptions that Disney's creative output might have waned. The company’s recent slate includes several financially successful films such as "Zootopia 2" and "Inside Out 2," contributing to the recovery from a slump affecting box office revenue that emerged post-2019, following "Avengers: Endgame." Factors contributing to this downturn included the COVID-19 pandemic and an oversaturation of Marvel and Star Wars productions.
Financially, Disney’s earnings remain below pre-pandemic levels but have exhibited substantial improvement driven by rising revenues and expanding profit margins. The valuation, at approximately 16.8 times forward earnings, presents an appealing proposition for investors focused on value and long-term growth.
Disney's ongoing and planned releases, such as "Avengers: Doomsday" and "Toy Story 5," are expected to sustain its box office performance. Additionally, the Disney+ streaming service has reached consistent profitability, bolstered by a Parks and Experiences division benefiting from expanded attendance despite broader consumer spending pressures.
The company is pursuing a multi-faceted growth strategy, blending new streaming content with theatrical releases, expanding and renovating global theme parks, and developing significant projects like Disneyland Abu Dhabi, projected for completion in the early 2030s, alongside potential new developments such as a fifth theme park at Walt Disney World beyond 2035.
Despite some declines in its traditional linear (cable) network business, Disney’s diverse and evolving business model supports expected gains in earnings and margins. Furthermore, a modest dividend yield of about 1.3% adds to the stock’s attractiveness from a value investment perspective.
Summary of Key Investment Considerations
- Meta Platforms offers an exceptionally profitable core business through its Family of Apps but faces risks from high expenditures in its Reality Labs division and increasing capital outlays for AI and data center infrastructure amid competitive pressure.
- Walt Disney has renewed creative momentum, a diversified portfolio spanning successful content production, profitable streaming, and expanding theme parks, which collectively underpin improving earnings and an attractive valuation.
- Both companies trade at valuations below the broader market benchmarks despite strong growth prospects, making them compelling considerations for investors prioritizing long-term value accumulation.
Risks and Uncertainties
- Meta’s substantial cash consumption by Reality Labs creates margin pressure and could limit free cash flow if the division remains unprofitable for an extended period.
- Rising capital expenditures, particularly linked to AI and data center investments, increase operational costs and could impact profitability if revenue growth does not keep pace.
- Disney's performance may be affected by continued challenges in its legacy linear networks and by the success of upcoming releases being critical to maintaining momentum.