Analysts stick by tech giant despite spending concerns

Analysts think there’s still room for Meta shares to run, even after the company posted disappointing metrics in its latest quarterly report . Meta on Wednesday reported third-quarter earnings per share of $6.03 on revenue of $40.59 billion, exceeding expectations of $5.25 in earnings per share on $40.29 billion in revenue, according to LSEG. However, the Facebook and Instagram parent reported weaker-than-expected daily active users for the quarterly period, and said it expects a significant acceleration in its capital expenditures next year due to growing infrastructure expenses. The stock — which is up more than 67% this year — shed more than 2% in premarket trading Thursday. META YTD mountain Meta performance this year. Wall Street majors are largely optimistic on Meta over the next year, with most firms assigning a price target that implies at least 5% upside. Analysts are in wait-and-see mode when it comes to Meta’s artificial intelligence investments, but think the company could be a leader in the space particularly as AI boosts advertising trends and hardware innovation tied to the company’s Reality Lab ventures. (Meta’s Reality Labs business continues to lose money, posting an operating loss of $4.4 billion in the third quarter.) Here’s where some of them stand: Bank of America: Reiterated buy and $660 price target, implied 11.5% upside Barclays: Reiterated overweight and raised price target from $550 to $630, implied 6.5% upside Bernstein: Reiterated outperform and raised price target from $675 to $685, implied 15.7% upside Citi: Reiterated buy and raised price target from $645 to $705, implied 19.1% upside Deutche Bank: Reiterated buy and $650 price target, implied 9.8% upside Goldman Sachs: Reiterated buy and $630 price target, implied 6.5% upside Morgan Stanley: Reiterated overweight and $600 price target, implied 1.4% upside Although Morgan Stanley has a price target on Meta shares that implies minimal upside, the firm is bullish on the company “META’s ability to drive better engagement/monetization through innovation continues to shine with a flush pipeline of GPU-enabled products for ’25/beyond. META remains best early GenAI winner in the group,” Morgan Stanley analyst Brian Nowak wrote in a note to clients. The company’s revenue results highlight its continued strong engagement and ad performance, which means investors “should be willing to tolerate investments (which are coming),” Nowak added. He pointed out that daily usage grew year-over-year across Facebook and Instagram in the U.S. and globally, and that improvements in AI-driven feed and video recommendations have boosted time spent on both platforms. Deutsche Bank’s Benjamin Black similarly highlighted Meta’s strong engagement levels, under-monetized Reels platform and new ad formats that are still in early growth stages. “To us, it is becoming increasingly evident that the scaled investments in core AI (and Gen AI) are having a tangible positive impact on advertising performance, driving an ever-widening gap between Meta and its peers,” the analyst said in a Thursday note. “We think this moat is still in the early innings and should continue to manifest itself in the form of improving ROAS for Meta’s advertising partners and, as a result, growing wallet share over time.” Bernstein analyst Mark Shmulik thinks fears around Meta’s 2025 capex range could be overdone given the company’s strong ROIC — or return on invested capital — from its AI-related investments in efforts to drive engagement with tailored content recommendations and ad placements. Shmulik has a price target on the high range of the Street. “We were a touch nervous on the ad business through year-end, but Meta eased those concerns with the top-end of guide pointing to 20% revenue growth,” he said in a Wednesday note. “We’re constructive on the core business, we believe Meta can continue delivering revenue growth above expectations.” Shmulik added that beyond 2025, investors have a “buffet of exciting upside from AI to business messaging to wearables” to expect from Meta.