Muse tops Apple App Store's free app list Wall Street is optimistic about Meta (META.US) AI monetization prospects

The Zhitong Finance App learned that Muse, the new AI agent launched by Meta Platforms (META.US), is receiving more and more positive reviews from Wall Street analysts. After reaching the top of Apple's US App Store free app download list, J.P. Morgan believes that Muse is expected to help Meta prove that its huge investment in artificial intelligence can not only boost its core advertising business, but also open up new sources of return outside of advertising.

J.P. Morgan pointed out that Muse currently ranks first in the US App Store free app download list. Its rapid spread effect combined with Meta's strong user distribution capabilities has made the market popularity surrounding this product “quite obvious.”

Although Muse is still in the early stages of user adoption, the bank believes it has the potential to become one of the most widely used consumer-grade AI apps after ChatGPT. As user size and usage activity continue to increase, Muse may begin to verify Meta's return on AI investment outside of advertising platforms.

J.P. Morgan believes that Muse's potential serviceable market size could reach tens of trillions of dollars, and reiterated Meta's “gain” rating and a target price of $820.

Bank of America analyst Justin Post also believes that the market response in the early days of Muse's listing sent a positive signal to Meta's overall AI strategy. After its official launch on September 8, Muse quickly topped the App Store productivity category. Currently, it still maintains a high rating of 4.9 stars in more than 25,000 user reviews.

Bank of America pointed out that one of the major concerns of investors before was whether Meta could create AI products with differentiated competitiveness. Muse's initial success is expected to boost the market's confidence that Meta's huge AI investment will ultimately achieve commercial returns. The bank maintains Meta's “buy” rating with a target price of $810.

Mark Mahaney, head of internet research at Evercore ISI, believes that Muse may begin to answer a core question that has long plagued Meta investors: can the company create new revenue streams outside of its existing business after investing huge sums of money to build AI infrastructure.

Mahaney said that one of Meta's greatest strengths is that it has around 3.6 billion users. If only 1% of existing users were willing to subscribe to Muse for $20 per month, the corresponding annual revenue could reach about $8 billion. In addition to the subscription model, Muse also has many potential commercial paths in the future, including advertising, paid subscriptions, and transaction revenue sharing.

However, Mahaney believes that Meta is more likely to prioritize expanding the user size and frequency of use of Muse in the short term rather than rushing to commercialize it. If Muse eventually develops into a new business of substantial scale, there is room for further expansion of Meta's valuation multiples.

Mahaney also compared Meta's current situation with the AI valuation revaluation that Google (GOOG.US, GOOGL.US) has experienced before. He pointed out that as market concerns about Google being left behind in the AI competition gradually subsided, the price-earnings ratio of Google stock increased from about 15 times to 30 times in about 12 months.

In his opinion, the current market environment Muse has created for Meta is similar. If Muse can prove that Meta not only has strong AI infrastructure and model capabilities, but can also create AI products that are widely used by consumers, the market's perception of the company's AI capital expenditure may further improve.

Mahaney said this is one of the key reasons Evercore sees Meta as its preferred stock. The popularity of Muse has also further strengthened the market's focus on consumer-grade AI smart device competition. For Meta, its core strength comes not only from AI technology itself, but also from its large existing user base and distribution capabilities developed by its Facebook, Instagram, and WhatsApp platforms. Once Muse can use this ecosystem to continue to expand its user base, Meta may gain new commercial portals outside of the advertising business.

However, Muse is still in the early stages of launch, and it remains to be seen whether user growth will continue and how large-scale business models such as advertising, subscription, and transaction sharing will eventually reach.

In terms of market performance, Meta's stock price has accumulated a cumulative increase of nearly 14% since this year, while Roundhill Magnificent Seven ETF (MAGS.US), which holds the “Big Seven Tech” such as Meta, rose more than 11% during the same period. According to Stocktwits data, retail investors' sentiment on Meta shares has now changed to “neutral” due to the high level of discussion.