BofA names Meta a top AI pick, raises price target on stronger ad growth

Meta Platforms' expanding artificial intelligence ambitions are creating new avenues for revenue growth beyond advertising, prompting Bank of America to raise its price target on the social media company and reaffirm it as a top AI investment pick. 

Bank of America raised its price target on Meta Platforms to $845 from $810, and also maintained its buy rating on the company's stock. 

The brokerage's revised outlook follows Meta's third-quarter revenue of $64.6 billion, up 26% year over year and above analysts' expectations of $63.3 billion. Advertising revenue reached $63.1 billion, beating estimates of $61.7 billion, while growth excluding foreign-exchange effects remained at 26% despite tougher comparisons with the previous year. Meta also forecast fourth-quarter revenue of $73 billion to $76 billion, above the Wall Street estimate of $73.6 billion.

BofA said Meta's AI investments are strengthening its core advertising business by improving content recommendations, ad targeting and advertiser returns. The brokerage highlighted improvements in user engagement across Instagram, Facebook Reels and Threads, arguing that deeper integration of large language models could support further advertising growth.

The analysts also pointed to emerging opportunities from Meta's Muse AI assistant and enterprise AI services. Meta is developing potential revenue streams through subscriptions, advertising, commerce transactions and enterprise offerings, including API licensing and coding agents. BofA said these businesses could begin contributing incremental revenue in 2027, while management is targeting more than 1 billion Muse users over time. Muse had surpassed 10 million setups in the United States and Canada within roughly six weeks of launch, according to the report.

BofA raised its 2027 revenue estimate by 1.3% to about $319 billion but trimmed its adjusted earnings outlook to $34 per share from $34.24, reflecting higher costs associated with scaling Muse and building its enterprise AI business. The brokerage expects expenses to rise substantially as Meta expands its AI infrastructure, with 2027 capital expenditure forecast at about $210 billion and free cash flow projected to turn negative by roughly $33 billion.

Meta's third-quarter earnings per share came in at $3.83, below the consensus estimate of $5.52, partly reflecting a one-time $9.9 billion legal settlement charge. BofA said profitability was stronger after adjusting for the charge, supported in part by lower-than-expected research and development spending.

The brokerage said growing visibility into AI monetisation could improve investor confidence in Meta's returns, although rising infrastructure costs, potential capital raises, competition from OpenAI and Google, and further legal or regulatory expenses remain risks. It sees Meta's current valuation as attractive relative to its growth prospects and believes the market is not fully accounting for the potential value of its AI models, agents and enterprise services.