Core Viewpoint - Meta Platforms, Inc. is positioned as a significant AI stock on Wall Street, with analysts predicting a potential upside following cuts to Metaverse spending, which could enhance earnings per share (EPS) by $2 by 2026 [1][5]. Group 1: Analyst Ratings and Predictions - Mizuho analyst Lloyd Walmsley has reiterated an Outperform rating for Meta with a price target of $815.00, following news of potential cuts to Metaverse investments [1]. - The anticipated cuts could lead to a major surge in Meta shares, with a recommendation for investors to add to their positions after a recent 5% increase in share price [3]. Group 2: Resource Allocation and Cuts - CEO Mark Zuckerberg is expected to significantly reduce resources allocated to the Metaverse, which is envisioned as a digital space for work and social interaction [2]. - Reports indicate that Meta may cut up to 30% of its Metaverse spending, impacting projects like Meta Horizon Worlds and the Quest virtual reality unit, potentially resulting in layoffs as early as January [3]. Group 3: Financial Implications - The cuts in Metaverse spending could add approximately $2 per share to the projected 2026 EPS of $29.50, while Reality Labs is currently incurring losses of about $5.85 per share [5]. - The cumulative operating income losses from the Metaverse since 2019 amount to $80 billion, raising questions about how much of the cuts were already factored into the 2026 guidance [5]. Group 4: Investment Considerations - While Meta is recognized as a potential investment, there are other AI stocks that may offer greater upside potential with less downside risk [6].

Core Insights - Meta Platforms is making significant budget cuts to its metaverse division, acknowledging that its previous focus on the metaverse was misguided and costly [1][5][11] - The company plans to reduce its metaverse budget by up to 30%, which is expected to save billions annually [6][11] - Meta's Reality Labs division has incurred substantial losses, with a reported loss of $13.2 billion in 2023 and $17.7 billion for the full year [3][11] Financial Performance - Meta's Reality Labs generated only $1.3 billion in revenue while incurring losses of $13.2 billion in 2023 [3] - The company's stock saw a positive reaction, increasing by several points following the announcement of budget cuts [6] - Since the layoffs in November 2022, which affected 11,000 employees, Meta's stock has increased over 500%, indicating a successful shift in strategy towards profitability [10] Strategic Shift - The cuts will affect products like Horizon Worlds and the Quest virtual reality unit, with layoffs expected as early as January [7] - This strategic pivot reflects a realization that technology must be useful to succeed, moving away from Zuckerberg's previous vision of the metaverse [7][12] - The company aims to redirect resources towards more practical applications, particularly in AI and other startup projects [12]

Group 1: Meta Platforms - Meta is considering cutting up to 30% of its Metaverse budget for 2026, primarily affecting the Quest virtual reality unit and Horizon Worlds [2] - The EU is planning a new antitrust investigation into Meta regarding its "Meta AI" tool within WhatsApp [3] Group 2: Netflix - Netflix announced its acquisition of Warner Bros Discovery for approximately $82.7 billion, valuing Warner Bros at $27.75 per share [3] Group 3: Amazon - Despite optimistic commentary on AI, investors are largely unresponsive to Amazon's claims of skyrocketing demand for AI infrastructure [5] - Anthropic, a company backed by Amazon and Google, is preparing for a potentially massive IPO, engaging Silicon Valley firm Wilson Sonsini for early preparations [6]

Core Viewpoint - Wall Street analysts have rerated Meta Platforms Inc following the company's consideration to cut up to 30% of its 2026 Metaverse budget, primarily affecting the Quest virtual reality unit and Horizon Worlds, which represent the majority of metaverse-related investments [1] Group 1: Budget Cuts and Financial Projections - JP Morgan analyst Doug Anmuth projected that Reality Labs spending will reach $21 billion in 2025 and $26 billion in 2026, with a potential 30% reduction in metaverse spending saving up to $5 billion [2] - If the savings are derived from headcount reductions, Meta could potentially cut approximately 11,000–13,000 employees, which would account for 15–17% of its workforce as of Q3 [3] - Anmuth maintained his expense estimates for 2026 at $153 billion (up 30%) and capex at $115 billion (up 61%) [5] Group 2: Expense Management and Growth Drivers - The analyst emphasized the importance of maintaining GAAP EPS growth, operating income expansion, and positive free cash flow during heavy capital expenditures [4] - A 10% cost reduction across the rest of the business could yield an additional $10 billion in savings, although these cuts are expected to be reallocated to data center and AI investments [8] - Despite anticipated material cost growth in 2026, Meta appears to have flexibility in cost allocations to protect EPS growth amid macroeconomic pressures [8] Group 3: Market Sentiment and Future Outlook - The shift in Reality Labs spending is seen as constructive for market sentiment, addressing investor concerns regarding long-term Metaverse investments [9] - Analysts foresee multiple growth drivers for 2026, including increased usage, AI enhancements, and new advertising opportunities, which could elevate revenue beyond current estimates [9] - Upcoming catalysts include the launch of Meta Business AI and new user-facing AI products expected in 2026, with initial guidance for 2026 expenses projected to grow 28–38% year over year [11] Group 4: Analyst Ratings and Price Forecasts - Doug Anmuth from JPMorgan maintained an Overweight rating on Meta with a price target of $800 [10] - Justin Post from Bank of America Securities reiterated a Buy rating on Meta with a price target of $810 [10]

Core Insights - Meta Platforms Inc. is expected to significantly reduce resources allocated to the metaverse, which was previously framed as the company's future direction [1][6] - Proposed budget cuts for the metaverse group could reach up to 30% next year, potentially leading to layoffs as early as January [2][4] - The metaverse group's budget cuts are part of the company's annual planning for 2026, with a standard request for 10% cuts across all divisions [3] Financial Performance - The metaverse group, part of Reality Labs, has incurred losses exceeding $70 billion since 2021 [7] - Investors have expressed concerns regarding the metaverse initiative, viewing it as a resource drain [5][8] Strategic Shift - Meta's focus is shifting away from the metaverse towards developing AI technologies and hardware products, such as AI chatbots and smart display glasses [7][8] - Analysts have suggested that Meta should consider discontinuing its metaverse projects, like Horizon Worlds, to concentrate on more profitable ventures [8]