Meta's stock finds a new defender, who predicts 30% upside from here

By Emily Bary

A BNP analyst says Meta's AI spending is necessary from a competitive standpoint - and will eventually pay off

Meta's stock is up 3% in Monday trading.

As Meta Platforms Inc.'s stock bounces further off its lows of the year, it has found an additional defender in the form of a BNP Paribas analyst who says the company's artificial-intelligence spending will pay off.

Meta (META) is different from its fellow big spenders in Big Tech because the company doesn't have a cloud-computing business. For that reason, some on Wall Street have grown concerned that the company won't be able to effectively monetize the swelling budget it has allocated toward AI. But BNP Paribas analyst Nick Jones took a different view, initiating coverage of Meta shares with an outperform rating on Monday.

He acknowledged that Meta could increase its capital expenditures at a faster rate than rivals, and that the company will be putting a greater portion of its revenue toward these AI costs as well. Nonetheless, Jones said this spending is an essential investment from a competitive perspective - and one that will ultimately prove fruitful.

Read: The lone bear on Meta's stock foresaw its struggles - and predicts more trouble ahead

"We believe return on these investments will be significantly higher over time than [their] cost and can accelerate Meta's growth," he wrote. "In our view, the near-term elevated capital expenditure, and resulting margin pressure, is necessary for Meta to solidify its competitive position in the AI race."

Already, the company has used AI to its benefit, according to Jones. He pointed to "significant strides" leveraging AI to improve user experience, augment advertising tools and boost engagement.

But the company has had a harder time proving itself with Meta AI, a digital assistant. "We note Meta AI is completely free to the users, whereas advanced features on ChatGPT and Gemini require a subscription," Jones wrote, referring to OpenAI's and Alphabet's respective offerings. "However, Meta AI remains subscale compared to ChatGPT and Gemini."

Furthermore, Llama, which is Meta's AI model, "continues to rank poorly on leaderboards," according to Jones.

"The competition in building a foundation model is intense and we think Meta has fallen behind its competitors," he added.

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While Jones was "more cautious" on Meta's model opportunity, he said the Facebook parent company has the opportunity to improve AI monetization more generally, all while gaining further market share of the global dollars earmarked for advertising.

"Ad pricing is expanding even as ad loads are increasing, reflecting robust advertiser demand," he wrote. Jones said Meta's "unparalleled scale" and strong targeting capabilities are among the factors resonating with marketers.

His $800 target price is just over 30% above current levels. Meta shares are up 3% in Monday's midday action.

Read: Google is crushing it. Why that's worrying investors in Nvidia and other AI stocks.

-Emily Bary

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11-24-25 1217ET