"Thill noted that Meta's 18% drop since its earnings has created an attractive risk-reward ratio. By comparison, in the same time period Amazon and Google have gained 4% and 18%, respectively, he wrote. "While this reflects concerns around margin pressure, capex ramp, and AI execution, it also creates meaningful upside if META addresses these headwinds which we believe is likely," Thill said."
"Thill added he remains optimistic about Meta's potential positive estimate revisions through 2026. He thinks that the fourth quarter was the worst of the sell-off, and that sentiment should improve with the company's expected new model release expected sometime in the first quarter of 2026. "We see limited downside from here, with upside driven by topline strength and continued efficiency gains offsetting opex growth," he added."
"Thill also applauded Meta's recent "all-star AI hires," which should now allow the company keep up with its peers. Moreover, he added that besides talent, the company now has all the key ingredients for AI computing power, users and data. Jefferies also said AI can continue to drive Meta's core advertising flywheel in 2026. "META is confident in its strong pipeline and ability to keep stacking AI gains in core recommendation and conversion systems in 2026," he wrote."
Meta's shares slipped 7% in January and 16% over the past three months, creating a lower entry valuation. A $910 price target implies roughly 48% upside from the recent close. The post-earnings 18% decline produced an attractive risk-reward given peers' gains and existing headwinds around margin pressure, capex ramp, and AI execution. Outlook includes potential positive estimate revisions through 2026 and an expected new model release in early 2026. Limited downside is expected if topline strength and continued efficiency gains offset opex growth. Recent high-profile AI hires and core AI infrastructure support advertising and recommendation improvements.
Read at www.cnbc.com
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