Dear META Stock Fans, Here’s 1 More Reason to Load Up on the Stock

Meta Platforms (META) remains one of the most important stocks in the market, for a number of reasons. The world's largest social media company has one of the most robust followings in terms of daily use of any company. I think that grip on its core consumer — with most people in the world already using Instagram, Facebook, WhatsApp, or another one of Meta's platforms — could be getting stronger. That is, if Meta's recently unveiled Muse Image AI model is what many expect it will be. 

Let's dive into what exactly the company announced with Muse — and why this release could be a big deal for META stock investors over the long term.

What Is the Muse Image AI Hype About? 

This AI-driven image generation model is Meta's first, and uses “advanced reasoning to understand complex prompts, seamlessly blending multiple photos into high-quality creations you can download and share anywhere." That's according to Meta's management team, who believes the future of image generation is likely to come by the use of AI technology.

With apparently so much excess compute, Meta is a firm that many are now looking at as less of a data-heavy innovation giant and more so one that may have overspent on capex for little in the way of near- or medium-term cash flow growth. But that's a rather pessimistic view. After all, Meta has built some incredible applications in the past.

For now, the jury is out on what exactly Muse will turn out to be, though I'll be one of the first to try this product out. 

Investors Face a Fundamental Conundrum

Right now, the market is focusing on free cash flow generation more so than I've seen in some time. To a significant extent, this is how I've always looked at stocks — the sum total of free cash flows generated into perpetuity, discounted back to today. That's what they teach us in business school, at the very least, when it comes to discounted cash flow models. 

Now, in today's world, stories and growth expectations have absolutely skyrocketed. That has led to a divergence of opinion around where stocks like Meta could be headed, as one minor tweak to a long-duration growth rate can make a big difference in what investors are willing to pay for shares today.

Right now, META stock trades at roughly 20 times both trailing and forward earnings. That is the market's way of saying Meta's forward growth rate isn't likely to accelerate or decelerate from here, so investors know with relative certainty what they're getting.

That's the premise I disagree with, considering how quickly the AI space is moving. In my view, the market is simply more likely to overshoot or undershoot growth expectations on this stock by a decent margin.

What Does Wall Street Think of Meta Platforms Stock? 

On that note, let's look at where Wall Street analysts are placing their bets. Currently, analysts have a consensus price target of $823.30 per share on this mega-cap tech name. If we go back to September of last year, this target makes sense, since it's closer to where META stock traded at the time.

Of course, since then, AI hype has died down considerably. Thus, this new price target probably better reflects the bullish potential upside of Meta over the near term.

I'm not going to say that Meta's high price target of $1,015 is likely, as I don't think it is right now. That said, I do think Wall Street is likely in the ballpark of where META stock could end up a year from now. To me, Meta Platforms stock is starting to look very attractive at current prices.