Meta Platforms (META) is spending a large amount of money to expand its artificial intelligence projects, which is causing some investors to worry. Interestingly, though, Meta spent heavily on the metaverse a few years ago. That spending caused the stock to fall sharply, and some investors are now seeing the same pattern, according to Bloomberg. As a matter of fact, the company stated that it could invest up to $72 billion in AI this year and potentially more in 2026.
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However, this has caused Meta’s stock to drop about 17% over the past four days, its worst slide since late 2022, which also happened when investors questioned the company’s spending plans. Understandably, some investors believe Meta is taking on too much risk. For instance, Tiffany Wade from Columbia Threadneedle Investments said that it feels like Meta is overspending again without showing clear proof that the spending will pay off. Another concern is that Meta doesn’t have a large enterprise cloud business that could benefit directly from AI demand.
Notably, Stefan Slowinski at BNP Paribas also said Meta still relies mostly on advertising and hasn’t succeeded in expanding into new business areas. Nevertheless, Meta is expected to grow revenue by 21% this year and continue growing at strong rates through 2028. In addition, the stock remains relatively cheap at 19 times forward earnings. Because of this, some investors, such as David Katz of Matrix Asset Advisors, see the recent stock decline as a potential buying opportunity by saying that, unlike the metaverse, AI has a clearer path to generating profits over time.
Is Meta a Buy, Sell, or Hold?
Overall, analysts have a Strong Buy consensus rating on META stock based on 34 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average META price target of $843.56 per share implies 32% upside potential.
