Key Takeaways
- Meta shares fell 11% in the past week. First came a third-quarter report with negative free cash flow, then plans to sell up to $97.5 billion of new stock to pay for its AI build.
- Nvidia is investing $3 billion and AMD $1 billion in the first phase of the sale, and the common stock reportedly drew about five times as many orders as there were shares.
- Revenue is still growing 26% and the stock trades below its five-year average forward multiple, so the dilution looks like a price worth paying.
- Canaccord Genuity’s $950 target works out to about 27x 2027 earnings estimates, above Meta’s 21x five-year average. The 2027 budget expected in late January will show how much more it has to spend.
Meta Platforms (META) is down 11% in the past week through Tuesday’s close, while the S&P 500 barely moved.
CEO Mark Zuckerberg says “Our investments are paying off.” This week, investors got the bill first.
The spending ate the beat
Meta’s Oct. 21 report had plenty to like: revenue rose 26% to $64.6 billion, with fourth-quarter guidance of $73 billion to $76 billion.
But capex has gone from about a third of operating cash flow in 2021 to 60% in 2025.
In the third quarter, capex of $34.9 billion topped $32.8 billion of operating cash flow, Meta’s first negative free cash flow quarter in over a decade.
Meta also raised the low end of its 2026 capex range to $135 billion. It gave no 2027 revenue outlook and said it expects to “continue investing aggressively.” The stock fell 7% on Oct. 22.
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Up to $97.5 billion of new stock
On Monday, Meta launched about $35 billion of common and mandatory convertible preferred stock, with up to $60 billion of its new non-voting Class C stock to follow from early 2027. Meta stopped buying back stock this year.
Early Tuesday, it priced the common bigger: $25 billion at $625 a share, up from $22.5 billion. That’s $37.5 billion priced, or about $97.5 billion with the Class C plan. Meta collects the common’s $25 billion as forward sales settle, by Nov. 19, 2027.
Nvidia (NVDA) is putting in $3 billion as the two expand their work on Muse, Meta’s family of AI models, and Advanced Micro Devices (AMD) is putting in $1 billion.
Chipmakers funding a big customer can look circular. But $4 billion is about a tenth of what priced this week, and the common reportedly drew about five times as many orders as there were shares.
Canaccord’s $950 asks a lot of Meta
Canaccord Genuity reiterated its Buy rating and $950 target on Tuesday, about 53% above the $620.19 close and 12% above the $847 consensus target.
At about 19x forward earnings as of Monday, Meta trades below its five-year average of 21x.
Analysts see earnings roughly flat this year, then up about 15% a year in 2027 and 2028.
Meta’s Next Test Is January’s Budget
Revenue growing 26% at a below-average multiple makes the dilution worth it to me. Canaccord’s $950 is the harder call: it’s about 27x analysts’ 2027 earnings estimate, well above the 21x five-year average.
Meta’s fourth-quarter results, expected in late January, should bring its 2027 budget. Consensus has capex at $203 billion, and anything well above that makes the full $60 billion Class C program more likely.
So what is Meta stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
