Wall Street is debating Meta's prospects. Should you buy its stock while it's down?

In Friday’s trading, shares of Muse, a developer of agent-based AI, and Meta Platforms, the owner of social media platforms Facebook and Instagram — Meta Platforms — fell 0.6% to $644.8 after plummeting 7% the previous day following the release of its third-quarter earnings report. Over the past five trading days, the company’s market capitalization has declined by 9%. Opinions on Wall Street regarding Meta’s prospects following the release of its latest financial report were divided: some analysts consider the company a clear leader in consumer AI thanks to its Muse assistant, while others are cautious and advise holding off on buying its stock, according to Barron’s.

— Morgan Stanley recommends buying. Thanks to the success of Muse, Meta now has the clearest winner among consumer products based on generative AI, according to Morgan Stanley analyst Brian Novak. He assigned the company’s stock an “outperform” rating and set a price target of $820, according to Barron’s. That’s 26% above Thursday’s closing price.

In the first six weeks after its launch, the Muse app was downloaded by more than 10 million users in the U.S. and Canada, Meta reported. About 25% of them—2.5 million people—use the service daily. In addition, more than 25% of weekly active users make purchases through Muse, and the average transaction amount for these purchases exceeds $200.

"We view this high level of commercial interest as encouraging in terms of Muse's long-term monetization potential, especially given Meta's existing relationships with approximately 500 million companies," Novak wrote.

— Bank of America recommends buying. Bank of America analyst Justin Post described Muse’s growth potential as “virtually unlimited.” He set a price target of $845 for Meta shares, according to Barron’s. That’s 30% higher than the closing price on October 22. According to Post, investors can now be more relaxed about Meta’s rising spending on artificial intelligence, as the commercial potential of new products becomes increasingly clear. “Although the costs of providing AI services will also rise, we believe Wall Street will now view the company’s investments more favorably, as the potential of the new products has become more apparent,” the analyst wrote.

— UBS recommends buying. The investment bank raised its price target for Meta shares from $884 to $892, anticipating a 38% increase from the closing price on October 22. The “buy” recommendation remains unchanged, according to Investing.com. According to the bank’s assessment, the company is entering a period in which the significant capital expenditures of the past three years on the development of cutting-edge AI models are beginning to pay off—primarily through improvements in the advertising business and the accelerated adoption of AI products.

UBS believes that optimized versions of Muse have the potential to further improve the effectiveness of ad targeting and content recommendations. This creates the potential for Meta’s revenue to exceed the bank’s current forecasts for 2027 and 2028. Analysts cite Meta’s intention to begin monetizing Muse more quickly than it did with the company’s previous major products—which typically took about four years to develop—as an additional positive factor. This means that accelerated revenue growth could begin sooner. Following the release of Meta’s earnings report, UBS raised its revenue forecast for Meta by approximately 1% for 2027 and by 2% for 2028; the bank believes that the further rollout of Muse could provide additional growth potential.

— Needham advises against rushing into a purchase. Needham analyst Laura Martin acknowledges Muse’s strong start but maintains a neutral rating on the company’s stock. Martin attributes the main risk not to Muse itself, but to Meta’s capital. The company announced that in January it will issue non-voting Class C shares to holders of Class A and Class B shares. In effect, this will be equivalent to a 2-for-1 stock split. “We recommend that investors stay on the sidelines” until the stock offering takes place, Martin advised. In her view, this move may indicate that Meta is preparing to raise approximately $100 billion through a stock offering in the first half of 2027, as the company “is approaching its debt capacity limit.”

Martin sees increased competition between Muse and other AI agents as an additional risk.

Wall Street is revising its estimates for Meta Platforms after the company raised the lower end of its capital expenditure range on October 21 and announced plans to create a new class of non-voting shares, further increasing its already massive investments in artificial intelligence. Currently, 62 out of 69 analysts recommend buying the tech giant’s stock, six advise holding it, and only one recommends selling. The average target price for the company’s shares—$846—implies a 30% upside potential relative to the October 22 closing price.

This article was AI-translated and verified by a human editor