Wells Fargo has raised its price target on Meta Platforms Inc. to $1,000 from $796, maintaining an Overweight rating. Analyst Ken Gawrelski believes the market's enthusiasm for Meta's Muse product cycle is justified, according to TheFly. However, he cautions that the upcoming third-quarter earnings call may temper expectations for Muse's near-term financial impact.
Investors are weighing the potential of Meta's consumer AI agent against rising spending and its effect on future profitability. Meta's stock was down 0.07% on Tuesday, reflecting the market's cautious stance.
Higher Spending Could Pressure 2027 Earnings
Wells Fargo projects Meta's 2027 operating expenses could reach $210 billion to $215 billion, exceeding the Street's estimate of roughly $202 billion. The firm expects earnings per share of $31 to $32 in 2027, below the consensus of about $34. This spending outlook follows a significant increase in Meta's cost base, with second-quarter revenue up 28% year-over-year to $60.8 billion, while costs and expenses surged 55% to $42.03 billion.
Meta currently guides full-year 2026 expenses of $165 billion to $169 billion and capital expenditures of $130 billion to $145 billion. Despite the higher spending, Wells Fargo views the investment cycle as supporting a potentially larger opportunity for Meta's AI products, drawing parallels to the early investment phase for Reels.
Investors will focus on Meta's third-quarter commentary for updated spending expectations and management's timeline for converting Muse adoption into revenue.
Muse Adoption Gains Momentum
Muse, launched in September as Meta's consumer AI agent, has attracted over 3 million weekly users who send at least one prompt and more than 1 million daily users, according to internal data reviewed by The Information. Citigroup also sees significant potential, estimating Muse could generate over $27 billion in annual revenue by 2030, including around $23 billion from transaction-related revenue and roughly $4.5 billion from subscriptions.
Citi notes that Muse downloads have exceeded 6.6 million since launch, with daily active users reaching 1.8 million as Meta expands awareness and new use cases. The brokerage views Muse as potentially becoming a key entry point for users searching, comparing, and transacting online, benefiting from a first-mover advantage as Meta broadens its AI strategy.
Advertising Business Remains Supportive
Meta's core advertising business continues to provide support. Deutsche Bank's latest channel checks were strongest for Meta and Alphabet, citing improved campaign performance, a more valuable mix of Reels and Stories inventory, and growing adoption of Meta's AI advertising tools.
Meta faces competition in the personal AI agent market from products like OpenAI's ChatGPT Dots, Google's Gemini, and Anthropic's Claude. The upcoming third-quarter results and commentary will likely provide clarity on the balance between rising AI-related investment, Muse adoption, and its potential revenue contribution.
Wells Fargo's higher price target reflects a more bullish long-term view, while its 2027 earnings expectations highlight potential pressure from higher operating expenses.
This article is for informational purposes only and does not constitute financial advice.
