"Despite beating on revenue and earnings, the company raised its full-year capital expenditure guidance to $125 billion to $145 billion, up from $115 billion to $135 billion. That $10 billion increase was enough to send the stock down more than 10%, wiping roughly $175 billion from Meta's market cap."
"Anmuth's $725 price target is based on 21x his 2027 GAAP EPS estimate of $34.01. At current levels, that implies roughly 8% upside. For a stock JPMorgan was previously overweighting, it is a dramatically more cautious stance."
"We believe full-stack AI competition is intensifying and Meta has a more challenging path to returns on heavy AI capex beyond advertising."
Meta reported a 33% revenue increase and earnings beat, with daily active users at 3.56 billion. Despite this, the stock fell over 10% after JPMorgan downgraded it to neutral, citing concerns over rising capital expenditure guidance and competitive threats in AI. Analyst Doug Anmuth highlighted that Meta's ability to generate returns on heavy AI investments beyond advertising is uncertain. The downgrade reflects a cautious outlook, contrasting with the growth seen in competitors like Google Cloud and AWS.
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