Evercore ISI analyst Mark Mahaney raised his Meta price target to $860, pointing to a possible $22 billion annual revenue opportunity from selling excess AI compute capacity starting in 2027. The call implies a gain of more than 50% from Meta's $559 close on Monday, even as the stock has fallen 6% over the past month.
A $22 billion compute opportunity
Meta shares have come under pressure again from the company's heavy AI spending, down 6% in the past month after a brief boost from a new model launch in early July. But Mahaney says Meta is sitting on what could be a $22 billion annual gross revenue opportunity starting in 2027.
In a Monday note, Mahaney raised his price target on Meta to $860 from $820, citing potential upside from Meta selling its excess AI compute capacity to outside buyers. The new target reflects a gain of over 50% from the $559 level Meta shares closed at on Monday, and the stock rose 2% on Tuesday.
Meta Compute could monetize excess capacity
Meta is the only hyperscaler without a public cloud business, but recent reports suggest the company could roll out a new Meta Compute division to monetize data-center capacity beyond internal use. The company is aiming to bring 14 gigawatts of capacity online by 2027 and plans to manufacture its own Iris chips.
Mahaney does not expect Meta to become a full neocloud business like Nebius or CoreWeave. Instead, he believes Meta Compute will be a tactical monetization of a deliberately thin slice of potential surplus capacity. Mahaney said management appears to be keeping expectations low: on the recent earnings call, CEO Mark Zuckerberg said Meta is getting offers to buy compute at a premium, but that it would be foolish to sell all of the compute for a short-term profit, since selling intelligence carries a significantly higher margin than selling compute directly.
The math behind the upside
If Meta were to sell its excess capacity, putting just 0.5 to 1 gigawatt on the market could bring in between $11 billion and $22 billion of external revenue per year, according to Mahaney's estimates. Leasing out 1 gigawatt would use only 7% of Meta's 14-gigawatt capacity goal for 2027, while adding up to $4.32 in per-share earnings.
Investors should think of a potential compute business as a call option, according to Mahaney. He would use compute optionality as a reason to own the AI infrastructure play in Meta, but would not underwrite a full-blown hyperscaler compute annuity stream. Meta shares currently trade at 17 times analyst earnings-per-share estimates over the next 12 months, within 10% of their trailing three-year trough valuation multiple, according to Mahaney.
Source: MarketWatch
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