Wells Fargo analysts have revised their outlook on Meta Platforms, suggesting that the company's early success with its Muse AI agent justifies a reduction in expected cloud capacity resales, which could amount to about $5 billion in high-margin revenue by 2027. They raised their price target for Meta's stock to $1,000 from $796, indicating a potential upside of nearly 35%.
This change in strategy reflects a broader shift in investor sentiment, moving away from the idea of Meta launching a cloud business to focusing on the profitability of Muse. The analysts noted that while renting out computing capacity could generate quick revenue, the long-term potential of Muse as a significant business opportunity is more appealing.
Meta's stock has seen a resurgence, rising 27% in September, following positive developments such as settling litigation related to youth social media addiction and launching Muse for both consumers and small businesses.
Despite the optimistic outlook, Wells Fargo cautioned that significant financial returns from Muse may not materialize until 2028, as Meta continues to invest heavily in AI infrastructure, with operating expenses projected to reach $212 billion next year.
Overall, while the immediate future may be dominated by AI spending rather than revenue, the analysts believe that Meta's strong advertising business provides the company with the flexibility to invest in its growth initiatives