Meta’s Strategic Pivot: From Metaverse Dreams to AI Monetization

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A significant strategic realignment is underway at Meta Platforms. The company is shifting its focus from costly metaverse experiments toward the monetization of artificial intelligence, a move that is now drawing focused analysis from Wall Street. While Morgan Stanley has trimmed its price target, the firm continues to view Meta as an underappreciated beneficiary of the AI revolution.

In a recent adjustment, analysts at Morgan Stanley lowered their price target for Meta shares from $820 to $750. Despite this reduction, the firm maintained its "Overweight" rating, indicating a continued belief that the stock will outperform the broader market, even with tempered near-term expectations.

This revision stems from lowered profit estimates. Forecasts for earnings per share (EPS) in fiscal years 2026 and 2027 were reduced by approximately 8%. For 2027, the analyst now models EPS of around $33. Morgan Stanley argues the valuation remains attractive even after these adjustments, with the stock trading at a price-to-earnings multiple of about 22. This sits notably below competitors like Alphabet, which trades at roughly 28 times earnings.

The bank's optimistic scenario still envisions a path to $1,000 per share. This would be driven primarily by Meta's offensive in "Superintelligence"—the development of more powerful AI systems with broad monetization potential across advertising and business applications.

Reallocating Capital: A Clear Shift in Priority

A central theme in current discussions is Meta's decisive change in budget allocation. The company plans to cut expenditures for its Reality Labs hardware division by up to 30% starting in 2026. This unit has accumulated operating losses exceeding $70 billion since 2021.

Investors are largely viewing this pivot positively. Capital is being redirected away from loss-making metaverse projects and toward areas with clearer, more immediate growth prospects. The core focus is now on expanding AI infrastructure and development. This move addresses a key investor concern of recent years: whether the massive metaverse investments would ever yield an acceptable return.

Despite the budget tightening, Meta is not exiting the hardware and interface business entirely. The appointment of Alan Dye, a former Apple executive, as head of design signals ongoing commitment. Dye will oversee hardware and software interface design, indicating that hardware remains a strategic component—but one now subject to stricter efficiency mandates.

Dividend Policy and Key Financial Metrics

Alongside the strategic shift, near-term shareholder returns are also in focus. Meta has declared a quarterly cash dividend of approximately $0.525 per share. The ex-dividend date is set for December 15, 2025, making ownership at the close of trading today critical for eligibility.

Other salient points from the current analyst consensus and projections include:

• The prevailing analyst rating remains "Strong Buy," despite individual target price reductions.
• Revenue expectations for 2027 stand at around $285 billion, roughly 4% above the prior consensus.
• The current share price of €554.20 sits slightly below the 50-day moving average and well under the 52-week high, suggesting a cooling-off period following previous peaks.

Market Perspective: Valuation Reset Overrides Short-Term Hype

Market observers, such as Jim Cramer, have characterized recent trading as somewhat "listless." A primary reason is the absence of short-term catalysts from the interest rate front; without new speculation on rate cuts, many tech stocks lack a immediate driver.

This environment, however, paints a different picture for Meta. The previously stretched valuation has meaningfully reset, coinciding with a clearer corporate emphasis on AI monetization over metaverse vision. This strategic reallocation—from experimental hardware toward generative AI infrastructure—marks a fundamental change in capital allocation for the coming fiscal years. For investors, the critical question now is whether Meta can successfully translate its AI projects into sustainable revenue and profit growth as planned.