Meta Platforms saw its shares decline about 3% on Wednesday, reflecting investor caution as Wall Street delivered mixed signals on the company's artificial intelligence strategy. While some analysts trimmed their price targets due to rising cost projections, others lifted theirs, betting on new revenue streams from AI-powered products.
Goldman Sachs Lowers Target on Spending Worries
Goldman Sachs reduced its price target on Meta to $762 from $860, citing potential upward pressure on operating expenses in 2027. The firm acknowledged that Meta's stock had rallied 37% from its August lows following the launch of its Muse AI agent and the release of the Wonder model. However, Goldman flagged discrepancies between its own forecasts and broader Wall Street estimates as the company invests heavily in product opportunities.
Despite the more cautious target, Goldman raised its revenue estimates for the next six to 18 months, pointing to favorable trends in digital advertising.
Rising Capital Expenditure Estimates
Concerns about spending are also emerging elsewhere. FactSet consensus estimates place Meta's 2027 capital expenditure at $193.88 billion, with analyst forecasts trending higher. Guggenheim's Michael Morris raised his 2027 capital spending estimate to $225 billion from $203 billion, reflecting Meta's commitment to funding its AI ambitions. He warned that a rival breakthrough could force the company into a cycle of continued investment.
Truist Securities' Youssef Squali also projected that Meta's annual capital spending would rise 32% to $190 billion in 2027, up from his previous estimate of $180.11 billion.
UBS and Guggenheim See AI Monetization Opportunities
UBS raised its price target on Meta to $884 from $715, pointing to the rollout of Business Agents and growing Muse usage as potential revenue drivers. The firm identified two key opportunities for generative AI monetization: generating revenue through WhatsApp and Messenger, and gaining market share in search advertising. UBS also cited advertising checks indicating that AI-driven automation and recommendations were making strong incremental contributions, potentially helping Meta capture a larger share of digital advertising budgets.
Guggenheim raised its price target to $850 from $700. Morris highlighted Muse usage and engagement as key factors that could influence investor sentiment ahead of the company's earnings call. Citing Apptopia data, Guggenheim said Muse reached 1.3 million daily average users over five weeks, which represents less than 0.05% of Meta's 3.6 billion daily active user base. Morris expects Meta to prioritize expanding usage before pursuing near-term monetization, with businesses paying to reach consumers through AI agents potentially becoming a revenue source consistent with Meta's existing advertising model.
Earnings Report in Focus
Meta introduced Muse Wonder and Muse Wonder Full on October 12, describing them as its most capable AI models to date. The launches have added to investor interest in the company's AI strategy, but questions remain about the costs required to compete with rival models.
Bank of America analyst Justin Post said growing investor concerns about 2027 capital spending could pose a risk to the stock, particularly if Muse adoption requires additional infrastructure. He maintained a Buy rating and an $810 price target.
Guggenheim expects Meta to continue scaling AI infrastructure to support advertising improvements and consumer AI products. Morris forecasts that free cash flow will remain under pressure through 2028, with positive growth returning in 2029.
Meta's upcoming earnings report is expected to provide further insight into its spending outlook and plans to turn AI investments into revenue. With Wall Street split between spending concerns and AI upside, Meta is likely to remain a closely debated name on investment platforms heading into earnings.
This article is for informational purposes only and does not constitute financial advice.
