Analysts are keeping a close watch on Meta Platforms, Inc. (NASDAQ:META), a company considered a top AI stock on Wall Street. Recently, Cantor Fitzgerald adjusted their price target for Meta stock, lowering it to $720 from $830, while maintaining an "Overweight" rating. This indicates a generally positive outlook, but with concerns about rising costs in the near future.
Why the Concern?
The firm's investor note highlights Meta's own guidance for FY26E, which projects a significant acceleration in operating expense growth compared to 2025. This increase is primarily attributed to depreciation, infrastructure operating costs, and the expense of hiring AI talent.
Additionally, Meta's new agreements with cloud vendors like GOOGL, ORCL, CRVW, and NBIS are expected to push cloud computing expenses beyond $40 billion. This represents a substantial increase in future financial commitments and could potentially create headwinds for the company in 2026.
The Numbers Game
Cantor estimates that Meta will likely face an additional $4 billion in costs in FY26E, translating to a 3 percentage point year-over-year growth. However, analysts point out that many of these payments are likely linked to the capacity brought online by Meta's partners. This introduces a level of uncertainty, potentially delaying expenses into the future. Despite this, some incremental headwinds are anticipated in 2026E.
As a result, Cantor forecasts total operating expenses of $152 billion (+30% year-over-year) for FY26E. This led to a 2% reduction in their FY26E EPS forecast and the revised price target of $720 (down from the previous $830).
Meta's Strengths: AI and Advertising
Meta Platforms continues to expand its advertising capabilities and invest heavily in both artificial intelligence and the metaverse.
Is Meta Undervalued?
Despite the potential of META as an investment, some analysts believe other AI stocks may offer greater upside potential with less downside risk. However, Meta leverages AI to gather data on user preferences, benefiting advertisers across its platforms, including Facebook, Instagram, and others. These platforms serve approximately 3.5 billion people daily.
Meta stock is considered attractively priced, particularly when compared to other AI stocks. The company's growth is rapid, yet its stock remains relatively cheap.
The company's core business model revolves around monetizing its massive user base through advertising. The sheer scale of access to nearly half the world's population, along with their time and data, is a powerful asset. Furthermore, these numbers continue to grow, increasing by 8% year-over-year in the third quarter.