Meta Platforms' generally solid third-quarter earnings showed both why the Facebook parent is today's winner in AI consumer agents -- Muse -- and why investors shouldn't be buying shares right now.
On Thursday, the day after the report, the stock fell 7.3% to $646.80 and was on pace to close below its 50-day moving average for the first time since Sept. 2.
Analysts had two big takeaways from the quarterly numbers.
The first: Meta, because of Muse's success, has the "cleanest" consumer generative AI winner, according to Morgan Stanley's Brian Nowak, who has an Overweight rating and a $820 price target.
The second: Despite Muse, investors should stay on the sidelines -- for now, wrote Laura Martin of Needham, who has a Hold rating and no price target.
Nowak and Needham might seem like they're contradicting each other, but they both, in fact, can be right.
To Needham's point, Meta reported that more than 10 million users across the U.S. and Canada have downloaded the Muse app in the first six weeks after its launch and about 25% -- 2.5 million -- use Muse daily.
Plus, more than 25% of weekly active users shop through Muse with an average purchase amount of more than $200.
"We see this high commercial intent as encouraging for Muse's longer-term monetization potential, particularly given META's existing relationships with around 500 million businesses," wrote Nowak.
Echoing Nowak was Bank of America's Justin Post, who called Muse's growth "open ended." He has a Buy rating and a price target of $845.
"While costs to provide AI services will also be increasing, we think the Street will look more favorably on investment now that product opportunities are more visible," Post said in the research note.
Needham's Martin acknowledged the bullish sentiment but stood firm, warning that it's "too early to buy" because Meta has said it would issue nonvoting Class C shares in January to Class A common holders and supervoting Class B holders in what amounts to a 2-for-1 split.
"We recommend investors stay on the sidelines," until the equity offering, she said.
To Martin, the split implies that Meta will raise about $100 billion of equity in the first half of 2027 "as it nears its debt ceiling."
And besides the split, Martin thinks Muse will be in a face-off with rival AI agents -- also bad for the stock.
There are two truisms about Meta right now: Muse is crushing the competition, but pulling the trigger on the stock right now could be a mistake.
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