Meta (META.US) AI commercialization prospects favored by Wall Street! Bernstein raises target price to $850; Morgan Stanley maintains "Overweight" rating.

Title context: Meta (META.US) AI commercialization prospects favored by Wall Street! Bernstein raises target price to $850; Morgan Stanley maintains "Overweight" rating. Text: After Meta Platforms (META.US) reported its Q3 2026 financial results, both Bernstein and Morgan Stanley expressed optimism about its artificial intelligence (AI) business prospects. The two investment banks believe that Meta's core advertising business continues to maintain strong growth, and the newly launched Muse personal intelligent assistant has initially demonstrated commercialization potential, which is expected to open up new revenue sources beyond advertising for the company. However, as the scale of AI infrastructure investment continues to expand, massive capital expenditures and future financing needs remain the main risks investors are focused on. Bernstein analyst Mark Shmulik raised Meta's target price from $800 to $850 and maintained an "Outperform" rating. Based on the October 21 closing price of $697.52, the new target price implies potential upside of about 22%. Morgan Stanley analyst Brian Nowak maintained Meta's "Overweight" rating and $820 target price, corresponding to potential upside of about 18%. The bank believes that Meta is currently one of the most attractive investment targets in the consumer generative AI space, that the growth potential of its core advertising business has not yet been fully unlocked, and that the long-term value of new businesses such as Muse, AI business agents, and subscription services has not yet been fully reflected in the share price. Meta's third-quarter revenue reached $64.601 billion, up 26% year over year, above market expectations of about $63.331 billion. Among this, advertising revenue was $63.061 billion, up 26% year over year, continuing to be the company's main growth driver. The strong performance of the advertising business came from simultaneous improvements in user engagement and commercialization efficiency. In the third quarter, ad impressions across Meta's apps increased 10% year over year, while the average price per ad rose 14%. The total number of daily active users across platforms including Facebook, Instagram, and WhatsApp reached 3.64 billion, up 3% year over year. Bernstein noted that Meta is continuously optimizing ad recommendation, content ranking, precise targeting, and creative generation capabilities through AI technology, thereby improving CKH HOLDINGS advertisers' return on investment during user usage. In the third quarter, time spent on Instagram achieved double-digit year-over-year growth, and watch time on Facebook Reels also recorded double-digit growth. Morgan Stanley likewise emphasized that there is still ample room for growth in Meta's core business. The bank noted that Threads' monthly active user scale has surpassed that of the X platform, with average time spent per user increasing more than 20% year over year. At the same time, by migrating its content understanding models to the Muse model system, Meta reduced the unit content processing cost for Instagram, Threads, Facebook, and the advertising business by more than 80%. The two investment banks believe that AI is not only improving Meta's user experience but also continuously raising the profit potential of its advertising business. As recommendation algorithms and advertising models continue to upgrade, Meta is expected to continue increasing the commercialization value of its existing traffic without relying on substantial user growth. Compared with the traditional advertising business, the early performance of the Muse personal intelligent assistant has become the most closely watched new highlight of this earnings report. Meta disclosed that about six weeks after Muse was launched, more than 10 million users had created personal intelligent agents, of whom about 25% use the product every day. Shopping has become one of the most popular use cases, with more than 25% of weekly active users participating in shopping activities through Muse, with an average purchase amount of more than $200 per transaction. Morgan Stanley believes that these data preliminarily prove that Muse can not only attract consumers to use it but may also have strong commercial conversion capability. Considering that Meta's platforms already connect about 500 million businesses, Muse is expected in the future to form diversified revenue sources through shopping transactions, business agents, subscription services, and AI tools for enterprises. In addition, more than 30% of Muse users have connected 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 noted that Meta has a massive social platform user base and mature commercial customer relationships, enabling it to rapidly promote Muse to both consumer and enterprise users. In addition to shopping and personal productivity tools, customer service for small and medium-sized enterprises, marketing creative generation, and business automation may also become important commercialization directions. However, both investment banks cautioned that Muse is still in the early stage of commercialization, and existing users are mainly concentrated among higher-value early adopters on Meta's platforms, whose usage behavior may not represent the broader consumer base. Whether it can reduce inference costs while expanding user scale in the future will be an important factor determining Muse's profitability. Meta management expects that over the next year, Muse's computing service efficiency is expected to improve by more than 10 times. Morgan Stanley believes that if this goal is achieved, it will help the company serve hundreds of millions of users at lower cost and create conditions for Muse's long-term profitability, but the relevant technological progress still needs continuous verification. While the AI commercialization outlook improves, Meta's expanding capital expenditures have also raised market concerns. The company adjusted its 2026 capital expenditure guidance range to $135 billion to $145 billion, raising the lower bound from its previous expectation, and said it will continue to actively invest in AI infrastructure and new products in 2027. Bernstein believes that there is no doubt about the growth capability of Meta's core business, but how much funding AI investment will ultimately require and how the company will fill a potential financing gap remain important uncertainties affecting the share price. The bank particularly focused on Meta's plan to launch a new Class C common stock in January 2027. According to disclosure, the company plans to distribute one non-voting Class C share per share to existing Class A and Class B shareholders, with an economic effect equivalent to a 2-for-1 split while maintaining the original voting rights structure. Bernstein noted that this arrangement also provides Meta with a channel to raise funds through equity financing in the future without weakening Zuckerberg's voting control. However, the size and timing of a potential new share issuance have not yet been determined, and investors still need to watch its impact on shareholder rights and valuation. Despite the massive scale of investment, Meta is also taking cost-control measures in some businesses. The company expects Reality Labs' loss to be about $18 billion to $19 billion in 2026 and is expected to narrow to about $15 billion in 2027. Morgan Stanley believes this reflects that while actively investing in AI, Meta is still trying to reallocate resources from lower-return businesses to areas with greater growth potential. On earnings forecasts, Bernstein raised Meta's 2027 revenue forecast from $313.622 billion to $316.226 billion and its earnings per share forecast from $33.21 to $33.64. Morgan Stanley raised its 2027 and 2028 revenue forecasts by about 1% each and increased its 2028 earnings per share forecast by about 2%. The bank maintained its $820 target price, based on a valuation of about 23 times the average earnings per share for 2027 and 2028. In a bullish scenario, Morgan Stanley assigns Meta a valuation of $1,000 per share, corresponding to potential upside of about 43%. The bank believes that if Muse's user growth exceeds expectations, or if enterprise AI agents, API services, and subscription businesses achieve greater commercialization breakthroughs, Meta's valuation may still have room for further improvement. Bernstein, meanwhile, believes that the strong performance of Meta's core advertising business and the initial returns from AI investment are sufficient to support a higher valuation, and therefore raised its target price to $850. However, the bank also cautioned that the scale of 2027 capital expenditures, potential equity financing, and the pace of Muse commercialization may still put pressure on the share price in the short term. Overall, both investment banks believe that Meta is transforming from a traditional digital advertising platform into a comprehensive AI ecosystem integrating personal intelligent assistants, enterprise AI services, and smart hardware. Its core advertising business still has strong profitability, while Muse provides new long-term growth opportunities. However, as AI investment enters a capital-intensive phase, the market's criteria for evaluating Meta are also changing. In addition to focusing on user growth CKH HOLDINGS and technological progress, investors will place greater emphasis on whether AI commercialization revenue can be realized in a timely manner and whether continuously expanding capital expenditures can generate sufficient investment returns.