What It Will Take to Get Meta Above This New Plateau

Meta Platforms (NASDAQ:META | META Price Prediction) trades at $694.25, below the $730 range where the stock keeps stalling. With the next earnings report coming up, investors are again asking whether it is still a buy, and the answer depends on whether AI spending starts paying for itself.

Meta’s apps (Facebook, Instagram, Messenger and WhatsApp) reach 3.60 billion people every day, and advertising brings in nearly all of its revenue. Shares closed at $597.37 on the day Meta reported second-quarter results. They have since climbed back, but they fell 8.95% over the past week from $762.50.

A 27% Ad Growth Engine Trading at 22x Forward Earnings

Ad revenue rose 27% to $59.36 billion. Meta served 14% more ad impressions and charged 12% more per ad. Advantage Plus, Meta’s AI-driven ad product, has passed a $75 billion annual revenue run rate. Strip out legal charges and severance, and operating income would have increased 9%.

The stock still trades at a forward P/E of 22 with a PEG ratio of 0.985. Management also says Meta is short on computing power and has received offers at “a significant premium” over what it paid for that capacity.

Capex Up to $145 Billion Is Draining Free Cash Flow

Meta expects to spend $130 billion to $145 billion on capex in 2026, up from $72.22 billion in 2025 (the power suppliers behind that expansion are the subject of a free report we put together on seven AI infrastructure stocks that aren’t chipmakers). Second-quarter free cash flow dropped to $784 million from $8.55 billion a year earlier. Operating margin fell to 31% from 43%, and long-term debt rose to $83.66 billion.

Diluted EPS of $6.18 missed the $7.22 consensus, which ended a six-quarter run of beats. Management also warned that youth-related U.S. trials could result in material losses.

Q3 Margins Will Decide Whether $730 Breaks

One-time items explain much of the second-quarter weakness: $2.4 billion in legal charges and $1.2 billion in severance. Management still expects 2026 operating income to come in above 2025. What it has left open is 2027 capex, which it did not guide, so cash flow beyond this year is hard to forecast.

Analysts See 18% Upside While Meta Lags the S&P 500

The 63 analysts covering Meta set an average target of $819, meaning about 18% upside. Analyst targets are estimates, and outcomes can differ. The ratings currently break down as follows:

• Strong Buy: 8
• Buy: 47
• Hold: 7
• Sell: 1

Meta is up 5.43% year to date, while the S&P 500 is up 12.78%. Over one year, Meta is down 4.87% and the index is up 14.56%. The stock trades at a trailing P/E of 25 and sits well below its 52-week high of $779.82.

Cash Flow Must Show the AI Payoff Before Meta Breaks Out

At $694.25, Meta still has to prove its AI spending pays off.

For the stock to clear $730 and stay there, three things need to happen. Third-quarter revenue has to land toward the top of the $61 billion to $64 billion guidance. Operating margin needs to recover toward the 40% range once the one-time charges drop out. And the first 2027 capex outlook has to show that spending is leveling off.

Earnings beats alone have not been enough. After the Q1 report, EPS came in 56.79% above estimates, yet the stock fell 8.55% that day. Investors are watching cash flow more closely than EPS.

A Buy case would need free cash flow to recover and more evidence that the 1 million businesses using Meta’s AI business agents each week are turning into revenue. A Sell case would need ad pricing to slow or a costly loss in the youth trials. The ad engine is strong enough to limit downside, and spending is heavy enough to cap the upside.

One more quarter of margin and cash flow data will show whether the AI return has started to appear in the numbers.

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