META Stock On Track For Worst Single Day Decline In 6 Months — Wall Street Debates Rising AI Capex Versus Strong Ad Growth

• According to TheFly, Barclays analysts expressed optimism about Meta’s growth, stating that it is growing twice as fast as the digital advertising industry even as it has become leaner.
• This comes amid Meta’s plans to trim its workforce by about 10% in May this year.
• Barclays also added that Meta’s introduction of Muse Spark earlier this month adds to its confidence that the company’s AI investments will pay off later.

Shares of Meta Platforms Inc. (META) were on track for the worst single-day decline in six months after the company’s rising capital expenditure outlook spooked investors.

Meta expects capex to be between $125 billion and $145 billion in 2026, higher than its previous forecast of $115 billion to $135 billion. According to Meta CFO Susan Li, the higher capex forecast is driven in part by rising memory prices and in part due to additional data center costs to support the company’s future capacity requirements.

Meta shares were down more than 9% in Thursday’s pre-market trade. META was the top trending ticker on Stocktwits at the time of writing.

Wall Street Divided

According to TheFly, Barclays analysts expressed optimism about Meta’s growth, stating that it is growing twice as fast as the digital advertising industry even as it has become leaner.

This comes amid Meta’s plans to trim its workforce by about 10% in May this year, impacting about 8,000 employees.

Barclays also added that Meta’s introduction of Muse Spark earlier this month adds to its confidence that the company’s AI investments will pay off later. The firm increased its price target for Meta to $830 from $800, while keeping an ‘Overweight’ rating.

Analysts at Cantor Fitzgerald also highlighted the strength of Meta’s advertising business, stating that the company has multiple avenues to monetize its investments over time.

However, the firm lowered its price target for Meta to $750 from $850 while maintaining an ‘Overweight’ rating, noting that increased capex to support AI capacity could raise investor concerns about return on investment.

Bernstein analysts trimmed their price target for Meta to $850 from $900 while keeping an ‘Outperform’ rating, noting that the company's AI product progress remains unclear and that second-quarter (Q2) revenue guidance was slightly soft.

Analysts at JPMorgan also cited the lack of AI product visibility as the reason for downgrading Meta to ‘Neutral’ from ‘Overweight’, while trimming the price target to $725 from $825.

Meta Beats Expectations

Meta reported earnings per share (EPS) of $10.44 in Q1, blowing past Wall Street expectations of an EPS of $6.82. Revenue came in at $56.31 billion, slightly ahead of an estimated $55.55 billion.

The company guided for Q2 revenue in the range of $58 billion to $61 billion. At a midpoint of $59.5 billion, it is slightly lower than the consensus estimate of $59.57 billion.

How Did Retail Traders React?

Retail sentiment on Stocktwits around Meta trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.

One user stated that Meta should have outlined a clear framework for how its capex will drive revenue over time.

Another user stated that the capex will set Meta up for incredible growth in the future.

META stock is up 1% year-to-date and 21% over the past 12 months. The S&P 500 ETF (SPY) is up 28% over the past 12 months, while the Invesco QQQ Trust ETF (QQQ) is up 39%.

The Vanguard Growth Index Fund ETF (VUG) is up 31% during this period, while the Vanguard Total Stock Market Index Fund ETF (VTI) is up 28%.

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