"Wall Street is thrilled": Meta is expected to grow after meta-universe spending cuts

Wall Street analysts greeted with excitement the news that Meta is planning to cut costs in its metasearch division, CNBC writes. In their opinion, this shows that the company is watching its "financial discipline" and continues to focus on efficiency and growth.

On the news about the reduction of expenses on the Meta universe, Meta's shares soared by almost 6% in early trading on December 4 in New York, renewing the maximum since the end of October. On December 5, the company's shares added another 1.7%.

- Citi: "This news, in our view, demonstrates that Meta can deliver continued growth based on its products by reallocating resources to the most promising ones," analyst Ronald Josi wrote. He again cited Meta as his top investment idea. Josi's forecast sets a target price of $850 for the company's securities. That's 26% above current levels.

- JPMorgan: "We are encouraged that Ma is listening to Wall Street on the need for cost discipline. Although we still believe it is important to emphasize the need for guidance on GAAP earnings per share growth (earnings calculated under generally accepted accounting standards - OnInvest), operating profit growth and maintaining positive free cash flow amid a significant increase in capital expenditures". The $800 target price for Meta shares set by analysts implies a potential upside of about 19% from current levels. JPMorgan gives a "buy" recommendation.

- Wells Fargo: "We consider press reports about a possible 30% cut in Reality Labs' budget a clear sign that Meta's management is actively restructuring its cost structure in favor of AI-related initiatives. We estimate the potential savings at about $2 per share on an annualized basis." Wells Fargo also recommends buying Meta's stock and sets a target price of $802, a potential upside of about 19%.

- Bank of America: "While we assume that costs in 2026 will still grow significantly - and at a higher rate than in 2025 - we believe it is important to consider the amount of flexibility Ma may have in allocating costs in 2026. In other words, Meta is likely to have cost contingency options next year that will help support earnings per share (EPS) growth even if macroeconomic pressures constrain revenue growth." Analysts' target price for Meta's stock is $810 per share (up about 20% from current levels). The recommendation from Bank of America is also to buy.

- Rosenblatt: If the reported budget cuts to the meta universe division are confirmed, it "could significantly support [Ma's] stock... We believe that Reality spending, which we estimate will result in a $17.6 billion operating loss in 2025, is primarily an operating expense rather than a capital expenditure. Therefore, reducing these expenses and shifting focus to more pressing priorities could significantly improve market sentiment and help bring the company's multiples closer to a level more consistent with its cash flow growth - i.e., our target price of $1117, which we believe is the highest in the market." These valuations are about 66% higher than Meta's quoted price at the moment.

Bloomberg reported on December 4, citing sources, that Meta is preparing to significantly reduce resources aimed at creating the so-called meta-universe. The budget of the meta-universe division next year, according to the agency's interlocutors, may be reduced by up to 30%. This group includes Meta Horizon Worlds virtual worlds and Quest virtual reality division.

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