Meta (META.US) AI commercialization prospects are favored by Wall Street! Bernstein raised its target price to $850, and Morgan Stanley maintains “gain” rating

The Zhitong Finance App learned that after Meta Platforms (META.US) announced its financial report for the third quarter of 2026, Bernstein and Morgan Stanley both expressed optimism about the future of their artificial intelligence (AI) business. The two investment banks believe that Meta's core advertising business continues to grow strongly, and the newly launched Muse Personal Intelligence Assistant has shown initial commercialization potential, which is expected to open up new revenue streams for the company other than advertising. However, as the scale of AI infrastructure investment continues to expand, huge capital expenditure and future financing needs are still the main risks investors are concerned about.

Bernstein analyst Mark Shmulik raised Meta's target price from $800 to $850, maintaining the “outperforming market” rating. Based on the closing price of $697.52 on October 21, the new target price represents about 22% potential upside.

Morgan Stanley analyst Brian Nowak maintained Meta's “gain” rating and a target price of $820, corresponding to a potential increase of about 18%. The bank believes that Meta is currently one of the most attractive investment targets in the field of consumer-grade generative AI. The growth potential of its core advertising business has not been fully unleashed, and the long-term value of new businesses such as Muse, AI commercial agents, and subscription services has not yet been fully reflected in stock prices.

Meta's third-quarter revenue reached US$64.601 billion, up 26% year over year, above market expectations of approximately US$63.31 billion. Among them, advertising revenue was US$63.61 billion, up 26% year on year, and continues to be the main driving force for the company's growth.

The strong performance of the advertising business comes from simultaneous improvements in user engagement and commercialization efficiency. In the third quarter, the number of ad impressions on Meta apps increased 10% year over year, and the average ad price increased 14%. The total number of daily active users on platforms such as Facebook, Instagram, and WhatsApp reached 3.64 billion, an increase of 3% over the previous year.

Bernstein pointed out that Meta is continuously optimizing ad recommendations, content ranking, accurate delivery, and creative generation capabilities through AI technology, thereby increasing user usage time and advertisers' return on investment. In the third quarter, Instagram users achieved double-digit year-on-year growth in usage time, and Facebook Reels also recorded a double-digit increase in viewing time.

Morgan Stanley also emphasized that there is still plenty of room for growth in Meta's core business. The bank pointed out that the number of monthly active users of Threads has surpassed that of the X platform, and the average user usage time has increased by more than 20% over the same period last year. At the same time, Meta reduced the unit content processing cost of Instagram, Threads, Facebook, and advertising businesses by more than 80% by migrating the content understanding model to the Muse model.

The two investment banks believe that AI is not only improving Meta's user experience, but also continuously increasing the profit potential of its advertising business. As recommendation algorithms and advertising models continue to be upgraded, Meta is expected to continue to increase the commercial value of existing traffic without relying on a significant increase in the number of users.

Compared to the traditional advertising business, the early performance of Muse's personal intelligence assistant became the most watched new highlight in this financial report. Meta revealed that about six weeks after the launch of Muse, more than 10 million users have created personal intelligence agents, and about 25% of them use the product every day. Shopping has become one of the most popular application scenarios. More than 25% of weekly active users participate in shopping activities through Muse, with an average purchase amount of more than $200.

Morgan Stanley believes that these data initially prove that Muse can not only attract consumer use, but may also have strong commercial transformation capabilities. Considering that Meta's platform has connected about 500 million companies, Muse is expected to form diversified revenue streams in the future through shopping transactions, commercial agents, subscription services, and AI tools for enterprises.

Additionally, more than 30% of Muse users have connected to at least one external service, and the number of related connector applications has doubled since the Meta Connect conference, indicating that its ecosystem is gradually taking shape.

Bernstein pointed out that Meta has a large social platform user base and mature commercial customer relationships, so it can quickly promote Muse to consumers and business users. In addition to shopping and personal productivity tools, customer service, marketing idea generation, and business automation for small and medium-sized enterprises may also become important commercialization directions.

However, both investment banks warned that currently Muse is still in the early stages of commercialization. Existing users are mainly concentrated on high-value early adopters of the Meta platform, and their usage behavior may not necessarily represent a wider range of consumers.

Whether it can reduce inference costs while expanding the number of users in the future will be an important factor in determining Muse's profitability. Meta management expects Muse's computing service efficiency to increase by more than 10 times in the next year. Morgan Stanley believes that if this goal is achieved, it will help the company serve hundreds of millions of users at a lower cost and create conditions for Muse's long-term profit, but related technological progress still needs to be continuously verified.

While AI commercialization prospects are improving, Meta's growing capital expenditure has also raised concerns in the market. The company adjusted the 2026 capital expenditure guideline range to US$135 billion to US$145 billion, raising the lower limit from previous expectations, and stated that it will continue to actively invest in AI infrastructure and new products in 2027.

Bernstein believes that Meta's ability to grow its core business is unquestionable, but how much capital is needed to invest in AI and how the company will fill the potential financing gap are still important uncertainties affecting stock prices.

The bank is particularly concerned about Meta's plan to launch a new Class C common stock in January 2027. According to the disclosure, the company plans to distribute one Class C share without voting rights to each of the existing Class A and Class B shareholders. The economic effect is equivalent to splitting in two, while maintaining the original voting rights structure.

Bernstein pointed out that this arrangement also provides a channel for Meta to raise funds through equity financing in the future without weakening Zuckerberg's control over voting. However, the scale and timing of the potential IPO has yet to be determined, and investors still need to pay attention to its impact on shareholders' equity and valuation.

Despite the large scale of investment, Meta is also taking cost control measures in some of its businesses. The company estimates that the Reality Labs business will lose about 18 billion to 19 billion US dollars in 2026, and is expected to narrow to about 15 billion US dollars in 2027.

Morgan Stanley believes this shows that while Meta is actively investing in AI, it is still trying to reallocate resources from low-return businesses to areas with more potential for growth.

In terms of earnings forecasts, Bernstein raised Meta's 2027 revenue forecast from US$313.622 billion to US$316,226 billion, and the earnings per share forecast from US$33.21 to US$33.64. Morgan Stanley, on the other hand, raised its 2027 and 2028 revenue forecasts by about 1%, respectively, and raised its 2028 earnings per share forecast by about 2%. The bank maintains a target price of $820, based on a valuation of about 23 times the average earnings per share in 2027 and 2028.

Under an optimistic scenario, Morgan Stanley gave Meta a valuation of $1,000 per share, corresponding to a potential increase of about 43%. The bank believes that if Muse users grow faster than expected, or if the enterprise's AI agent, API service and subscription business achieve greater commercialization breakthroughs, there is still a possibility that Meta's valuation will increase further.

Bernstein, on the other hand, believes that the strong performance of Meta's core advertising business and the initial return on AI investment are sufficient to support higher valuations, so the target price was raised to 850 US dollars. However, the bank also warned that the scale of capital expenditure in 2027, potential equity financing, and the speed of Muse commercialization may still put pressure on stock prices in the short term.

Overall, both investment banks believe Meta is transforming from a traditional digital advertising platform to a comprehensive AI ecosystem integrating personal intelligent assistants, enterprise AI services, and smart hardware. Its core advertising business still has strong profitability, and Muse provides new long-term growth opportunities.

However, as AI investments enter a capital-intensive phase, the market's evaluation criteria for Meta are also changing. In addition to focusing on user growth and technological progress, investors will pay more attention to whether AI commercialization revenue can be realized in a timely manner, and whether continued expansion of capital expenditure can generate sufficient return on investment.