Why This Analyst Sees a Massive AI Payoff for Meta-Just not Right Away

Dow Jones
昨天

Meta Platforms's Muse has been huge news on Wall Street, but one analyst is warning the big headlines won't immediately be followed by big returns.

As Meta continues to invest heavily in its artificial-intelligence infrastructure, 2027 will likely be a "trough" year for earnings, with Muse generating modest revenue, Wells Fargo wrote late Monday.

Analyst Ken Gawrelski, however, advised investors to look past that temporary period toward massive, high-margin AI revenue expected to begin in 2028. Wall Street's financial expectations for fiscal 2027, however, have run too hot ahead of that rollout and will likely need a meaningful reset to reflect that realistic timeline, he added.

Gawrelski raised his price target on Meta stock to $1,000 from $796 while maintaining his Overweight rating. That's one of the highest price targets among the 69 analysts polled by FactSet. The average price target set on Meta stock is $796.79.

Wells Fargo sees Muse as part of a large, AI-driven product cycle, potentially much bigger than the company's Reels transition in 2022, when Meta aimed to shift user attention away from posts and Stories toward short-form videos.

With that, however, may come a bit of a recovery period. Higher infrastructure costs and a $5 billion loss in capacity resales, given that Meta needs all its hardware for Muse, could compress earnings per share for fiscal 2027, Gawrelski wrote.

After consensus estimates realign, Gawrelski anticipates Meta could become a "positive revisions story" once the company's AI product revenue begins to stack atop its core advertising revenue, which has boomed as time spent on Instagram has accelerated. That strong growth also has helped accumulate the necessary cash flow to fund this AI transition.

Citi analyst Ronald Josey wrote Tuesday that Muse has seen over 6.6 million downloads and has been the most downloaded app for 16 consecutive days. The firm expects Muse to generate over $27 billion in revenue at scale. Josey also reiterated his Buy rating on the stock and $800 price target.

Investors appeared indifferent to the price target increase. Shares of Meta Platforms rose 0.2% to $743.01 Tuesday. The stock has gained nearly 21% since the company announced Meta on Sept. 8, according to Dow Jones Market Data.

 

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