Analysts Hit META with Price Target Cut Over A.I. CapEx Spending

Core Viewpoint - Meta Platforms' stock is experiencing a sell-off despite reporting record revenue in Q3, primarily due to increased capital expenditures and a significant one-time charge impacting earnings per share [1][6][13]. Financial Performance - Meta reported revenue of $51.24 billion, exceeding expectations of $49.6 billion, indicating strong performance [7]. - The company faced a one-time charge of nearly $16 billion, which significantly reduced earnings per share to $15, compared to expectations of $6.72, marking a substantial miss [6][13]. Capital Expenditures - Meta is raising its capital expenditure (capex) estimates for the year to a range of $70 to $72 billion, up from a prior outlook of $66 to $72 billion [9]. - The CFO indicated that capex in 2026 is expected to be even higher than in 2025, with total expenses projected to grow significantly faster in 2026 than in 2025, driven by infrastructure costs and hiring [10][11]. Analyst Reactions - Oppenheimer downgraded Meta to "perform," citing concerns over high spending and the inability to rationalize the current price-to-earnings (PE) ratio of about 29 until visibility into 2027 improves [12][13]. - Benchmark also downgraded Meta to "hold," removing their price target due to increased competition and a belief that shares will remain range-bound in the near term [15]. Market Comparison - Analysts are favoring Alphabet over Meta, noting that Alphabet offers predictable earnings at a reasonable valuation, trading at a similar PE ratio [14][16]. - The overall sentiment in the market suggests that Meta's aggressive spending strategy is viewed with caution compared to competitors like Google and Amazon, which are perceived to be better positioned [16].