Meta Shares Ahead of Earnings Report: Buying Opportunity or Start of Fresh Price Pressure?

Meta Platforms is on the verge of releasing its third-quarter financial report, an event that could once again subject the tech giant's shares to significant volatility. Increased investment in AI infrastructure, along with the early success of the company's new product 'Muse', has created differing expectations about Meta's future profitability.

Meta Platforms Company is on the verge of publishing its third quarter financial report; An event that can once again face the shares of this technology giant with significant fluctuations. Increased investment in AI infrastructure, along with the initial success of the company's new product, Muse, has created mixed expectations about the future of Meta's profitability.

Meta stock is down more than 7.95% after three of the last four financial reports.

Muse application has crossed the 5 million download mark in three weeks.

Citi analysts predict Muse's revenue in 2030 to be around 27 billion dollars.

Meta shares are trading at a price-to-earnings ratio of around 23 points.

Meta stock has lost 7.95% or more after releasing three of its last four financial reports. However, some analysts believe that short-term pressure on profitability could underlie significant revenue growth in the coming years.

Muse; A success that can be costly

Meta's new product, Muse, is an agent-driven artificial intelligence assistant that has attracted more than 3 million weekly users in its first three weeks of release. This reception indicates significant growth capacity given that Meta has access to approximately 3.6 billion daily active users across its portfolio of platforms.

However, Muse's success has created an economic challenge. The implementation of this technology requires extensive processing power, while its current income is still not commensurate with the possible development costs. Meta offers paid subscriptions in addition to the free version, but it expects the bulk of Muse's future revenue to come from transaction fees that smart agents make.

Therefore, the rapid increase in users can increase the investment cost of the company before the revenue growth.

heavy investment; The main concern of the market

Wells Fargo analyst Ken Gawrelsky believes that the growth of Muse users may force Meta to devote more processing capacity to internal products. Such a decision could delay a possible plan to lease excess processing capacity to external customers.

In this scenario, increased data center spending, pressure on free cash flow, and a weaker-than-expected earnings outlook increase the likelihood of a negative market reaction to the upcoming financial report. However, rising costs are not necessarily a sign of a weakening business; Rather, the economic return of these investments has a decisive importance.

Horizon 2028; Possible point of change in profitability

Wells Fargo estimates that 2027 may be the lowest point of Meta's profitability in the new investment cycle; Because high-yield AI revenues will probably become more important from 2028. Meanwhile, Citi analyst Ronald Josi projects Muse's revenue in 2030 to be around $27 billion, $23 billion of which could come from transactions.

This figure is approximately equivalent to 12% of Meta's revenue for the last twelve months. Of course, the realization of such an estimate will depend on the sustainable growth of users, increased commercial use and the ability of the company to convert smart interactions into real revenue.

"In my opinion, the main criterion for evaluating meta at this point is not the rate of increase in capital expenditures, but the ability to convert expensive AI infrastructure into sustainable cash flow and a defensible competitive advantage. If Muse can move from user acquisition to massive monetization, the current squeeze on margins could be temporary in nature. However, the buying opportunity gains more credibility when the share valuation also reflects the risk of delays in commercialization and the real return on new investments."

Meta Advantage; The link between artificial intelligence and advertising

Meta-advantage is not limited to the development of a new product. AI can simplify the process of designing, testing and targeting ads for small businesses.

Also, the production of image and video content and a more accurate understanding of user behavior provides the capacity to increase interaction and improve advertising revenue. Despite these opportunities, rising infrastructure depreciation costs are likely to put pressure on operating profit in the short term.

valuation; Does the drop in price create an opportunity?

At around $718.67, Meta stock is trading at a forward price-to-earnings ratio of nearly 23. This valuation can be attractive if the expected earnings growth is realized, but the cheapness of the share cannot be proven without examining the cash flow, cost of capital and sustainability of profitability.

Meta's upcoming financial report is likely to be more influenced by the AI investment outlook than current revenue growth. Muse's success can both put short-term pressure on profitability and increase the company's long-term growth capacity.

As a result, a possible drop in shares after the financial report is not necessarily a sign of a weakening of Meta's competitive position; Just as Muse's initial success is no guarantee that revenue projections will be met.

Artificial intelligence has been used to translate some parts of this report.