Prediction: Meta Will Be Bigger than Amazon in 3 Years

Meta Platforms (NASDAQ:META) and Amazon (NASDAQ:AMZN) continue to be among the top so-called “Magnificent 7” stocks in the market, with valuations well above the $1 trillion threshold. That said, Amazon has remained the more valuable of the two companies since Meta went public (formerly as Facebook), and all indications are that this dynamic will remain the same moving forward. After all, Amazon is much more than an e-commerce giant, it’s a company that provides the cloud infrastructure and logistics backbone for much of the economy to run.

However, Meta’s high-margin operating model and focus on social media (and digital advertising) could translate into higher growth in the years ahead. The valuation discrepancy between the two companies (Meta is worth around $1.56 trillion, while Amazon is worth $2.42 trillion at the time of writing) is large, but is not necessarily a gap that can’t be overcome in the years ahead. That gap is one that could certainly close, if Amazon’s growth momentum slows while Meta’s earnings growth continues.

Here’s why I think a case could be made that Meta is a better pick than Amazon over the next three years, with the potential to overtake the e-commerce juggernaut over this period.

Key Points About This Article:

• Meta and Amazon are two Magnificent 7 stocks investors weight differently in their portfolios, depending on their views around these companies’ respective growth rates.
• Over the next three years, here’s why I think Meta could actually outperform Amazon and turn the market capitalization tables over.
• 4 million Americans are set to retire this year. If you want to join them, click here now to see if you’re behind, or ahead. It only takes a minute. (Sponsor)

Meta’s Incredibly Strong Fundamentals

Meta Platforms is a company that’s providing investors with plenty of fundamental reasons to own this stock. The company’s stock price has continued to move to new all-time highs, as investors continue to value Meta’s dominant market position and its earnings growth capabilities in a positive light. I don’t expect that to change anytime soon.

The company’s fiscal 20204 revenue came in at $117.9 billion, with projections indicating a growth of around 15% for 2025. This growth is expected to continue to be driven primarily by its advertising business, which remains robust despite economic fluctuations. Analysts expect earnings per share (EPS) growth of about 12%, suggesting that profitability will be maintained even as the company increases its investments in artificial intelligence and other technologies.

Meta’s financial health is further underscored by its high EBITDA/sales ratio, indicating strong operational efficiency and profit margins. The company has a solid net margin, outperforming many peers in the tech sector. These factors alone position the company well for future growth. Despite a relatively high price-to-earnings ratio of 27-times, most analysts view Meta as one of the more affordable large-cap tech stocks, particularly when compared to its “Magnificent Seven” counterparts.

However, the company does face challenges, including rising expenses associated with its ambitious investments in the metaverse and AI. Nevertheless, with strong cash flow and upward revisions in revenue forecasts from analysts, Meta Platforms appears poised for continued success in the evolving digital landscape.

Amazon Is Certainly No Slouch

Amazon’s financial fundamentals as of January 2025 indicate strong past performance and a solid market position. For the third quarter of 2024, Amazon reported revenues of $125.6 billion, reflecting 15% year-over-year growth. This robust revenue growth is complemented by a net income of $6.3 billion, resulting in a net profit margin of 5.01%.

The company’s earnings per share (EPS) stood at $4.68, with a price-to-earnings ratio of 47-times. This indicates that Amazon stock is much more expensive than that of Meta at current levels, but also indicates investors are willing to pay a premium for Amazon’s growth potential. Additionally, Amazon’s operating cash flow surged by 56% year-over-year, reaching $55.3 billion, which enhances its liquidity position and ability to invest in future growth initiatives.

However, the company faces competitive pressures, and these pressures could provide further downside in terms of performance over the medium-term. For one, the e-commerce market is becoming increasingly crowded with new entrants and established competitors enhancing their online offerings. Companies are leveraging advanced technologies such as artificial intelligence to improve customer experiences and streamline operations, which puts additional pressure on Amazon to innovate continually. The challenge lies in whether Amazon will be able to maintain its market share while adapting to these competitive dynamics.

Why Meta Is My Mega Cap Tech Giant Of Choice

One of the primary drivers of Meta’s anticipated growth is its focus on advertising revenue and Generative AI. Analysts predict that Meta’s earnings per share (EPS) will increase significantly, reaching approximately $16.98 in 2025, up from $14.80 in 2024, with total revenue projected to hit around $178.25 billion.

The social media giant has so far shown significant progress in leveraging artificial intelligence technology to boost its earnings and cash flows. And with positive results from the company’s year of efficiency (and more layoffs reportedly starting now), there are reasons to believe the company’s margins (and multiple) could continue to expand significantly from here.

That’s not to say Amazon isn’t a great long-term investment. I think it is. However, if I had to choose between the two, Meta would be the clear winner right now based on the company’s fundamentals and growth trajectory.

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