Shares of Meta Platforms have come under pressure in 2026, but Morgan Stanley sees the recent pullback as a potential entry point, citing strong fundamentals and long-term growth drivers.
The stock is down about 19–20% year-to-date, weighed by legal setbacks, macro uncertainty, and heavy spending on artificial intelligence.
However, Morgan Stanley analyst Brian Nowak reiterated an Overweight rating and set a $775 price target, implying significant upside from current levels.
“It’s time to buy Meta,” Nowak wrote, naming the stock his top pick in the internet sector.
Meta stock has gained 2% on Monday.
Sentiment weak, but fundamentals remain strong
Recent volatility has been driven in part by legal challenges and broader geopolitical uncertainty, raising questions about Meta’s regulatory outlook and business model.
The company incurred roughly $380 million in legal penalties following two lawsuits, prompting investor concerns about potential restrictions on its advertising operations.
Despite this, Nowak argued that regulatory risks may be overstated.
“In a world where we believe the US government is behind and supporting Meta in order to help make them one of the global AI leaders, we expect to see thoughtful legislation that balances social-media access against proposals that could materially impair Meta,” he wrote.
At current levels, Meta is trading at around 15 times its projected 2027 earnings, representing a 55% discount on a price-to-earnings-growth basis relative to megacap peers.
According to Nowak, such a discount has occurred only a few times over the past decade, suggesting “a tactical buying opportunity with catalysts ahead.”
Advertising growth and AI investments drive outlook
A key pillar of Morgan Stanley’s bullish view is the resilience of Meta’s core advertising business, which continues to benefit from strong engagement trends.
“We believe engagement (time spent) is accelerating (off of large numbers) which gives META even more time and engagement to monetize,” Nowak wrote. “We believe the time spent growth is high quality and monetizable too given the surge in video-based content.”
Morgan Stanley forecasts ad revenue growth of 28% in 2026 and 21% in 2027, both above broader market expectations.
At the same time, Meta is investing heavily in artificial intelligence, with a capital expenditure target of $135 billion for 2026.
While such spending has raised concerns among some investors, analysts view it as a strategic move to strengthen long-term competitiveness.
The company is also focusing on inference capabilities and AI-driven advertising tools, which could improve efficiency and expand monetization opportunities across its platforms.
AI agents and cost cuts offer additional upside
Emerging AI initiatives represent another potential catalyst.
Nowak highlighted the possibility of a “MetaClaw” agent, which could enable new use cases such as integrated shopping across platforms like Messenger.
Meta has also been expanding its AI capabilities through acquisitions and partnerships, including deals involving AI agent platforms and social networks.
“The more utility Meta can drive for advertisers, the larger share of budgets it is likely to capture going forward,” Nowak wrote.
In addition, cost-cutting measures could support earnings growth.
The company is reportedly planning workforce reductions of up to 20%, which could generate annual savings of between $3 billion and $10 billion and boost earnings per share in the coming years.
Despite near-term risks tied to regulation, AI spending, and macro conditions, Morgan Stanley maintains that Meta’s combination of strong advertising fundamentals, discounted valuation, and AI-driven growth opportunities positions the stock for a potential rebound.
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