MoffettNathanson Turns Cautious on META, Citing Accelerating AI Spend

Meta Platforms, Inc. (NASDAQ:META) is one of the AI Stocks Making Moves on Wall Street. On November 19, MoffettNathanson cut its price target for the stock to $750, warning that “this time is different” from previous tech resets. The firm believes that there are steep margin risks amid accelerating AI investments for Meta.

The firm believes that there is a lack of cost discipline in the company, calling for ‘another year of efficiency’ as margins face multiyear pressure.  Much of the firm’s past year has remained being focused on how Meta’s rising AI investments would pressure margins and stock price.

Even though it had assumed that any valuation shake would be followed by a slowdown in revenue, the “the sheer scope of these investments… appears to have come into focus way ahead of any revenue shortfall.”

With Meta shares having fallen 20% in the past weeks, the firm believes it was “too complacent” in its previous investment stance and anticipate further margin compression.

In particular, Reality Labs spending remains a concern. Overall, the firm believes that it has become harder to defend the stock and that Meta may drift until cost discipline returns.

Meta Platforms has been expanding its advertising capabilities and also invests heavily in artificial intelligence and the metaverse.

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