While belonging to the elite “Magnificent Seven,” Meta Platforms (META) has failed to shine over the past year—its stock largely flat and significantly underperforming its six tech giant peers. However, a different voice is emerging from Wall Street.
Meta’s stock surged 5.7% on Thursday, catalyzed by a new research note from Jefferies analyst Brent Thill. He reiterated his “Buy” rating on Meta and set a price target of $910. This implies a potential upside of approximately 45% from Wednesday’s closing price.
Thill points out that Meta is currently the lowest-valued stock among the Magnificent Seven, trading at a trailing price-to-earnings ratio of just 28.5x. This valuation partially reflects market concerns over the company’s massive spending. In recent years, Meta has sharply accelerated its investments in artificial intelligence (AI) infrastructure and talent, while its Reality Labs division, responsible for the metaverse, continues to report steep losses—booking an operating loss of $4.4 billion in the last quarter alone.
Concurrently, Meta’s stock performance has notably lagged behind its peers. Over the past year, shares of rival Alphabet (GOOG, GOOGL) have appreciated about 65%, while Meta has stayed essentially flat, particularly following a sell-off after its Q3 earnings report last October.
However, Thill paints a different picture in his report, suggesting the market may be overly pessimistic.
First, he believes Meta’s core social media business will be the primary beneficiary of an “AI flywheel” effect driven by its heavy investments. Data shows Meta’s core digital advertising business delivered an impressive 26% growth last quarter—a notable rate for a business of its scale. Thill argues that AI technology is enhancing the precision and efficiency of its ad systems, directly boosting core performance.
Second, Thill sees new monetization opportunities emerging. The commercial potential of its messaging app, WhatsApp, remains largely untapped. More importantly, Threads, Meta’s competitive platform to X (formerly Twitter), is gaining solid momentum. Meta recently announced it would roll out digital ads to all Threads users globally, following tests in select markets beginning last spring. The company also disclosed that Threads now boasts an impressive 400 million monthly active users (MAUs)—a user base and potential ad inventory expansion that cannot be ignored.
Thill also expressed optimism that Meta’s AI investments will begin to bear fruit in 2026. This is undoubtedly the central concern for Meta’s stock currently. Since the company rebranded and pivoted heavily toward the metaverse in 2022, tens of billions in spending have yet to show clear financial returns. Given Reality Labs’ persistent losses, investor skepticism toward the current massive generative AI investments is understandable. A positive signal Thill highlights is that, unlike metaverse spending, the current AI expenditures also feed back into and strengthen the company’s core, profitable advertising business.
Investors can look forward to more details on Meta’s AI progress and financial performance when the company reports earnings next Wednesday, January 28. The market will be closely watching its capital expenditure plans, advancements in AI products, and their impact on profitability.
Amid generally elevated valuations for tech stocks, Meta appears “cheap” due to its hefty spending and losses in certain business segments. Jefferies’ report suggests that market concerns may be overshadowing the robust resilience of its core business, the immediate empowerment AI provides to its main operations, and the growth potential offered by the new Threads platform. Whether this “cheapest giant” can truly stage a turnaround in both valuation and performance, as the analyst predicts, will be put to the test in the coming quarters.
