Despite recent market pressure, Baird analysts remain bullish on Meta Platforms, Inc. (META.US)'s medium- to long-term prospects, believing that advancements in artificial intelligence (AI) and monetization opportunities will provide further upside for the stock. On Tuesday, Baird analyst Colin Sebastian slightly lowered Meta's target price from $820 to $815 but reaffirmed an "Outperform" rating, suggesting the current moment may present a "buy on dips" opportunity. Based on Monday's closing price of $661.5, the new target still implies approximately 23% upside potential.

Sebastian noted that Meta continues to face mixed investor sentiment, with short-term volatility likely to persist. However, compared to three months ago, market expectations have become more balanced, allowing investors to capitalize on periodic pullbacks for strategic positioning. Year-to-date, Meta's stock has risen about 13%, slightly underperforming the S&P 500's ~17% gain. Since hitting a record closing high of $790 on August 12, shares have retreated roughly 16%.

The company's mixed Q3 earnings on October 30, which included declining margins and increased AI infrastructure spending expectations, triggered an 11% single-day drop. Market concerns primarily revolve around two issues: Meta potentially "falling behind" in AI compared to other tech giants and intensifying competition in social media, particularly with TikTok's continued presence in the U.S. market.

In his research note, Sebastian highlighted that investors' most common concern is Meta's unclear AI improvement trajectory, which could lead to years of slower growth and margin pressure as user activity shifts toward large language models. However, he remains optimistic about next year's outlook, citing Meta's upcoming next-gen AI model as a potential catalyst for enhanced AI capabilities. On the revenue front, advertising remains a growth driver, with AI improving ad relevance and new monetization avenues opening in platforms like WhatsApp.

Sebastian stated, "We believe divergent sentiment around Meta may persist into early 2026, particularly regarding medium-term margin trajectories. However, current market negativity may be slightly overdone, and as narratives improve next year, the stock could shift back to a positive trend."