Deutsche Bank Lowers Meta Price Target to $880

Deutsche Bank analyst Benjamin Black lowered the price target on Meta Platforms Inc.

(NASDAQ: META) to $880 (from $930) while maintaining a Buy rating.

“We have been here a couple of times before, and each time it ended the same way… good for META’s longer-term equity value.

This time, Meta is accelerating its investment in AI/infrastructure faster than we anticipated, which will likely result in Capex being much higher in the near-medium term.

Now, investors are clearly skeptical again, with META stock down more than 8% in the after-hours, and our FY26/27 free cash flow estimates come down by ~(40)%/(30)%, respectively.

That said, this time it’s slightly different from prior investment rounds in our view.

To start, this time around, the company is building out infrastructure, which should supplement the current advertising model, vs. prior cycles which typically resulted in near-term cannibalization of better monetizing, though aging surfaces/formats.

In fact, the FoA business is fundamentally very strong at the moment, with core AI investments driving continued engagement growth, and the ad platform becoming even more performant.

As such, as the fastest growing ad platform at scale, we argue Meta is still leaning into its growing Gen AI ambitions from a position of strength.

On the other hand, some will argue that META has yet to scale any real tangible scaled new products from this growing investment cycle.

We argue that the infrastructure is somewhat fungible and can be leveraged to scale the ad platform even faster in a worst case scenario.

In our view, while the scale of these ambitions (and investments) is vast, and requires significant investments that have a longer-dated payback horizon, we contend that these capital investments are also having strong returns in terms of engagement and ad performance.

This is translating into Meta’s current durable advertising revenue growth.

Simultaneously, it is affording the company the ability to strategically lean in to foundational AI model training work, which could unlock vertically integrated opportunities across large TAMs including business messaging, Meta AI (potentially Search Advertising), and scaled wearables.

All in, we lean on the company’s track record of high ROI investments which have, in the past, resulted in products that drive scaled consumer adoption.

Perhaps more importantly, given the reasonable valuation after last night’s pullback and fundamentally better advertising platform that’s gaining share, we argue it seems prudent to invest with Mark Zuckerberg’s growing AI ambitions now.

As such, we maintain our Buy Rating, though given our lower FCF and Earnings estimates we lower our target price to $880 (from $930), which is based on a 27x (unchanged) FY27E GAAP P/E multiple.”

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