Mark Mahaney initiates a bullish $860 price target on Meta, citing the success of Muse AI, even as the company grapples with massive infrastructure spending and compressed margins.
Mahaney's $860 price target and 30% growth outlook drive bullish sentiment despite a weak Q2 earnings report.
Meta and BlackRock are jointly developing a 1GW data center in El Paso, signaling capital partnership.
Mahaney cites Google's historical re-rating from 15x to 30x earnings as a comparable for Meta.
Evercore ISI analyst Mark Mahaney has designated Meta Platforms as his top pick, issuing an $860 price target based on the potential of the Muse AI assistant. Despite a 91% collapse in Q2 free cash flow and surging capital expenditures, Mahaney projects 30% growth, banking on a 1% subscription conversion rate among Meta's 3.6 billion users to drive long-term revenue.
Meta's free cash flow has been impacted by a massive increase in capital expenditures, which rose 82% in Q2 as the company invests heavily in AI infrastructure, including new data centers.
Muse AI is viewed as a key growth catalyst, having already driven a 60% increase in daily interactions. Analysts believe it provides multiple monetization levers, including advertising, subscriptions, and transaction revenue.