Should You Buy Meta Platforms and Google Parent Company Alphabet Now That They Are Cheaper Than Coca-Cola Stock?

Meta Platforms (NASDAQ: META) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) both pulled back from recent highs, with Meta posting a somewhat disappointing quarter in April and Alphabet tumbling last week due to weaker-than-expected YouTube advertising revenue.

Meanwhile, Coca-Cola (NYSE: KO) hit an all-time high on Friday -- pushing its price-to-earnings (P/E) ratio to 26.8 -- above Meta's 26 and Alphabet's 24. If you're wondering how a stodgy company like Coke can garner a higher valuation than two tech giants investing heavily in artificial intelligence, you've come to the right place.

Here's why Coke deserves a high valuation, why Meta and Alphabet are relatively cheap, and whether either growth stock is a buy now.

Image source: Getty Images.

A stable stalwart

Coke deserves a premium valuation because it is excellent at what it does and shows no signs of losing its commanding position. Coke has a portfolio of beverage brands across soft drinks, juices, coffee, tea, energy drinks, and sparkling/tonic water. Sticking to what it does best -- managing existing brands and then acquiring or developing new ones -- is a proven model that is extremely stable. Sure, consumer preferences change. But many of Coke's products are genuine staples that enjoy stable demand no matter what the economy is doing.

Coke has a transparent value proposition to investors. It passes along profits through a growing dividend. The payout increased for 62 consecutive years and the yield is a compelling 2.9%. Coke is the ultimate safe stock for risk-averse investors, making up for its slow growth with stability -- a winning formula.

The changing landscape of media

Meta and Alphabet make up a combined 43% of the communications sector weighting in the S&P 500 , trouncing the value of linear networks and telecommunication companies. Their dominance continues to grow as advertising and marketing campaigns shift toward targeted digital spending based on consumer preferences.

The internet revolutionized the way that thoughts, ideas, and critical information are shared. But even in recent years, there have been shifting dynamics in media. Meta rose to prominence with Facebook, but now Instagram has proven to be a powerhouse of its own. Instagram used to be a gallery of images. Now, short videos through stories or reels are the main draw. Funny and informative clips can be easily shared, making Instagram a new kind of social network.

Similarly, Google search was -- and still is -- Alphabet's most valuable segment. But ChatGPT and SearchGPT compete with Google search. YouTube has grown into a cash cow, but competes with Instagram, TikTok, and other outlets.

The key takeaway is that Meta Platforms and Alphabet have footholds in media, but the make and feel of their positions have noticeably changed. It's a stark contrast to a company like Coke, whose moat isn't as penetrable.

The need to constantly innovate means high research and development (R&D) expenses and pressure to make those investments pay off. R&D as a percentage of revenue is higher for Meta Platforms and Alphabet than Nvidia , Microsoft , or Apple .

META R&D to Revenue (TTM) data by YCharts

Perhaps the simplest reason Alphabet and Meta Platforms sport relatively inexpensive valuations is that their businesses are less safe than other major tech-orientated companies. Apple's loyal customer base and integrated ecosystem of software and hardware is unmatched by any company in the world. Microsoft has several high-margin segments , from integrated cloud to Office 365, LinkedIn, Windows, Xbox, and more. It has a diversified business packed with legacy solutions and new growth drivers.

It would be nearly impossible to severely disrupt Apple or Microsoft in a short amount of time. However, it is entirely possible with Meta Platforms and Google. In fact, TikTok did just that a few years ago, knocking Meta Platforms and its stock price to their knees.

Toward the end of 2022, Meta Platforms' stock price was under $100 a share as the company scrambled to establish Reels as a tool that could go toe-to-toe with TikTok. It worked, and the stock is up fivefold from the lows that year. However, that painful period in Meta's history is still in recent memory, and it may lead investors to think twice about going all-in on Meta and giving it a valuation compared to Microsoft.

Rewarding shareholders in a variety of ways

While it's easy to point out their risks, it would also be a mistake to discount Meta and Alphabet's ability to adapt to changing trends and innovate . They also generated tons of free cash flow that has been used to repurchase stock -- with both companies reducing their outstanding share counts by 11% over the last five years. That's nearly on pace with Apple, known for buying back a boatload of its own stock. It reduced its share count by just shy of 14% over the last five years. As of this year, Meta and Alphabet also pay modest dividends , which is yet another way they reward shareholders.

The key takeaway is that both companies have evolved into established, high-margin businesses that generate enough cash to support expensive R&D budgets and return capital to shareholders. That level of wiggle room illustrates just how strong of a position these companies are in. They can afford advertising revenue to drop during a recession. And they have the resources needed to stay relevant and adapt to customer trends. Both companies also have increasingly strong balance sheets and don't heavily rely on debt to run their operations.

Two balanced buys worth considering now

While Meta and Alphabet deserve to be less expensive than a more stable winner like Microsoft or a high-octane growth stock like Nvidia, I don't think they should be so cheap that they trade at a discount to the S&P 500 -- which currently has a 28.5 P/E ratio.

Meta and Alphabet have numerous advantages that the vast majority of companies simply can't compete with. They both stand out as good buys now, especially for investors looking for a balance of growth, value, and income.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .