Morgan Stanley: Google Trades at 12% Premium, Meta at 30% Discount as Internet Giants' Valuations Polarize

TechFlow reports that according to Chaoxiang Research, Morgan Stanley's August 25 research note indicates that the internet sector fell by an average of 2% last week, Meta dropped approximately 7%, Amazon fell about 2%, and Google remained roughly flat. Amazon, Google, and Meta currently trade at forward P/E ratios of 19x, 17x, and 17x based on 2026 earnings estimates, representing discounts of 36%, premiums of 36%, and discounts of 24% relative to historical averages, respectively. On an EV/EBITDA basis, Amazon trades at 11.2x, a 12% discount to its two-year average; Google at 15.1x, an 8% premium; and Meta at 8.7x, a 30% discount. Morgan Stanley maintains an "attractive" rating on the internet sector, noting that AI capabilities are becoming a core driver of valuation divergence.

The sector's overall forward EV/EBITDA is 9% below its five-year average, while EV/Sales is 16% above its five-year average, highlighting a divergence between revenue and profit multiples. Once adjusted for stock-based compensation on a cash-expenditure basis, the underlying EV/EBITDA for digital media increases by approximately 36%, e-commerce by 30%, and travel and the sharing economy by 44%. Upcoming catalysts include the launch of Google's Gemini 4, stabilization of Amazon Web Services growth, progress in Meta AI's advertising monetization, and shifts in the interest rate environment.