Meta Platforms has traded near $648 through 2026 even as quarterly revenue hit records, and a growing group of analysts argues the stock is underpriced. Reaching a $900 target would mean roughly 39% upside, resting on Meta's AI-driven ad gains, a cleared legal overhang, and heavy AI spending that has yet to show up in the share price.
Meta's AI ad engine outpaces its valuation
Meta's second-quarter revenue reached $60.8 billion, up 28% year over year, with a 31% operating margin. Yet the stock trades at a forward price-to-earnings ratio of 19, below the S&P 500's roughly 22 times forward earnings.
Internal model upgrades drove an 8.3% lift in ad clicks and a 15.7% conversion gain on Facebook last quarter. Those gains pushed Advantage Plus past a $75 billion annual revenue run rate. Ad impressions across the Family of Apps rose 14% year over year, while average price climbed 12%. More than 1 million businesses already use Meta's AI-powered business agents weekly, and the company plans to move the tool behind paid subscriptions.
A settled legal overhang clears room for AI focus
Meta settled youth social media addiction lawsuits for up to $18 billion over a decade, adding new teen limits on Facebook and Instagram. Morgan Stanley analyst Brian Nowak noted that users under 18 account for just 1% of Meta's revenue, limiting the near-term financial hit. With the overhang removed, MarketBeat indicated management can redirect focus toward AI product launches.
Nowak maintains a $775 price target on Meta. He expects AI products, including agentic ad tools, subscriptions, and a neocloud computing business, to lift Meta's earnings per share by more than $10. Meta carries a consensus "Strong Buy" rating from 62 analysts polled by S&P Global, with an average price target of $754.77.
Heavy capex is the test the bulls still face
Capital expenditures reached $31.1 billion in Q2, up 82% year over year. Reality Labs lost $4.62 billion in the quarter. That spending compressed free cash flow to $784 million last quarter, down from $8.55 billion a year earlier.
Meta's Connect 2026 event opens with a Zuckerberg keynote on Sept. 23, followed by third-quarter earnings in late October. Both events will show whether the capital converting into visible AI revenue can justify the bull case.
Source: TheStreet
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