Meta Has Fallen Nearly 20% Since January. So Why Are Analysts Still Backing The Stock?

Meta Platforms Inc. has lost nearly a fifth of its market value since January, yet Wall Street remains overwhelmingly bullish despite rising AI costs and lower valuation targets.

Meta's share price has retreated sharply over the past six months, but the selloff has done little to shake analysts' confidence in the business. Research firms have lowered price targets as the company's artificial intelligence spending has gathered pace, though most still expect Meta's advertising engine to generate enough growth to support those investments over time.

Bloomberg data reflects that divide. On Jan. 29, 73 analysts recommended buying the stock, six advised investors to hold it and one had a sell rating. By Jul. 29, the mix had barely changed, with 72 buy ratings and seven holds. The average price target, however, slipped to $787.40 from $835.65 as analysts reassessed what the business was worth after a series of increases in capital spending.

The past six months have therefore been less about confidence in Meta's business and more about confidence in the pace at which its AI spending will translate into fresh sources of revenue.

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From Optimism To Caution

JPMorgan's research captures that shift.

After Meta reported fourth-quarter earnings in January, the brokerage raised its December 2026 price target to $825 from $800 and kept an Overweight rating. It said stronger advertising growth, improving engagement and advances in AI had given Meta the financial capacity to pursue an ambitious investment programme while maintaining healthy earnings growth. 

Its stance changed after the first-quarter results.

Although JPMorgan acknowledged that AI continued to improve advertising performance and user engagement, it downgraded the shares to Neutral from Overweight and cut its target price to $725. The brokerage pointed to the rapid increase in infrastructure spending, stronger competition across AI and limited visibility on how quickly Meta's new AI products could become meaningful contributors outside advertising.

Other firms became more cautious on valuation without changing their recommendation.

UBS reduced its target price to $865 from $908 after the first quarter but retained its Buy rating, saying the commercial payoff from Meta's AI investments would take longer to emerge as new products matured. 

Wells Fargo reached a similar conclusion. It reaffirmed its Overweight rating, lifted its target price slightly to $770 and said Meta still offered attractive long-term growth through AI-enabled advertising, messaging and consumer applications despite heavier infrastructure spending. 

Even before the year began, Deutsche Bank had warned that investors were likely to focus on the gap between accelerating costs and future returns. The brokerage kept its Buy rating but said the shares could remain under pressure until Meta demonstrated a clearer return on its AI investment. 

Results Keep Delivering

The business itself has given analysts few reasons to turn negative.

Meta reported first-quarter revenue of $56.3 billion, up 33% from a year earlier. Ad impressions climbed 19%, the average price per advertisement rose 12% and operating margin held at 41%, underlining the resilience of the company's advertising franchise. 

The momentum carried into the second quarter. Revenue increased another 28% to $60.8 billion as advertising demand remained firm. Expenses, however, rose much faster after higher infrastructure costs, legal charges, severance payments and spending on AI talent. 

The company's spending plans also became progressively larger.

In January, Meta projected 2026 capital expenditure of $115 billion to $135 billion. Three months later it raised that range to $125 billion-$145 billion. Following the second-quarter results, it lifted the lower end of its annual expense forecast to $165 billion and narrowed capital expenditure guidance to $130 billion-$145 billion.

ALSO READ: Meta Forecast Disappoints; Zuckerberg Defends Massive AI Spending

Management's View Hasn't Changed

While brokerages adjusted valuation models, Meta's leadership kept delivering the same message.

Chief Executive Officer Mark Zuckerberg described 2026 as a year in which the company would move from improving its existing products to building new AI services. During the first-quarter earnings call, he said Meta had reached an important milestone with the launch of the Muse family of models and outlined plans to build products around personal and business AI assistants. 

Chief Financial Officer Susan Li said the company was expanding data centre capacity and securing long-term computing resources to support future AI products. She also highlighted stronger advertising performance, business messaging and commerce tools as evidence that Meta was already benefiting from AI across its existing businesses. 

The second-quarter update carried the same message. Zuckerberg said AI was improving the company's core advertising business while opening the door to a broader range of consumer and enterprise products, reinforcing management's willingness to keep investing heavily. 

What Has Changed

Meta's business looks stronger today than it did at the start of the year. Revenue has exceeded expectations, advertising demand has remained healthy and most research firms still recommend buying the stock.

The difference lies elsewhere.

In January, brokerages were debating whether another round of AI investment would yield another round of growth. Most have settled on yes. The question now is harder: how fast returns will follow and whether revenue beyond advertising will justify one of the biggest capital programmes in the technology sector.

Meta shares are down nearly 20%. The buy ratings have held. What has changed is not the view of the business - it is the certainty over when it pays off.

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