Meta's pullback creates upside opportunity as valuation discount widens, analysts say

Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB) shares offer an attractive risk-reward following a recent pullback, according to Jefferies analysts, who reiterated their ‘Buy’ rating and $910 price target on the stock.

The stock traded hands at $612 at the analysts’ time of writing, down about 18% since its last earnings report.  

The analysts outlined five reasons why investors should buy the pullback, pointing to valuation, earnings outlook, artificial intelligence investments, core advertising momentum, and the scaling of newer revenue streams.

Jefferies noted that Meta shares have fallen since the company’s most recent earnings report, underperforming peers such as Alphabet and Amazon. As a result, the stock is now trading at a notable valuation discount. While the discount reflects investor concerns around margin pressure, rising capital expenditures and AI execution risk, Jefferies wrote that it also creates upside potential if those issues are addressed.

The analysts said they remain optimistic about Meta’s earnings outlook through 2026, even if management guides to higher-than-expected capital expenditures and operating expenses next year. Jefferies expects elevated spending to be largely anticipated by investors, noting that management has previously signaled higher investment needs and has a history of issuing initial guidance that ultimately proves conservative.

The firm expects sentiment to improve as Meta moves past what it sees as peak margin pressure and approaches a potential new AI model release in early 2026. “We see limited downside from here, with upside driven by topline strength and continued efficiency gains offsetting opex growth,” they wrote.

On artificial intelligence, Jefferies highlighted Meta’s recent hiring efforts and the potential impact on its model development. “META is reportedly poised to release a new frontier model(s) in the 1H26, which we see potential to help right the ship,” the analysts wrote.

While acknowledging earlier challenges with Llama 4 and skepticism around Meta’s AI culture, Jefferies said the company now has the core components needed to compete, including its user base, data, compute infrastructure and talent.

Jefferies also pointed to continued momentum in Meta’s core advertising “flywheel,” driven by AI-powered improvements to recommendation and conversion systems. The analysts noted that Meta remains confident in its pipeline and its ability to deliver further AI-driven gains across its core platforms in 2026.

In addition, the firm highlighted the growing contribution from incremental revenue engines, particularly WhatsApp. Jefferies estimates WhatsApp currently generates about $9 billion in annualized revenue and sees potential for that figure to grow to $36 billion by fiscal 2029, representing roughly 10% of Meta’s total revenue, with limited risk of cannibalizing existing businesses.

The analysts also noted early-stage ad monetization at Threads, which they estimate has around 500 million users, and longer-term optionality from Meta’s AI offerings, including the possibility of paid features in the future.

“While Llama and other AI offerings are mostly open source for now, we wouldn’t be surprised to see META introduce paid features in the future,” they wrote.