An Analyst Just Named Mark Zuckerberg's Meta a Top Large-Cap Long Idea, Citing AI-Driven Ad Momentum and an Attractive Valuation
Key Points
Mark Mahaney at Evercore believes Meta is undervalued and sets a price target of $820.
Meta's revenue and ad impressions are growing, and it trades for 17 times forward earnings.
However, the company's capex and AI model delays have worried investors.
Mark Mahaney, an Evercore analyst, called Meta Platforms (NASDAQ: META) his top large-cap long idea on July 22. He believes advertising demand and ad improvements driven by artificial intelligence (AI) will drive continued revenue growth, and that the company is undervalued currently.
One week later, Meta released an underwhelming earnings report, and its share price dropped about 10% in a single day. Mahaney reiterated that he expects the stock to outperform, but he lowered his price target from $930 to $820.
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Is the social media giant an undervalued megacap or a value trap? Let's take a closer look at why Mahaney likes it and whether his thesis still holds.
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Meta looks like a bargain
At a glance, Meta stock has a lot to offer. Its social media platforms averaged 3.6 billion daily active users across its brands in June 2026, one of the largest user bases among tech companies.
Despite its entrenched position, it's still delivering double-digit growth. Revenue was up 28% year over year to $60.8 billion in the second quarter of 2026, and ad impressions increased 14% year over year.
The growth is there, it has a dominant market position, and it trades at just 20 times trailing earnings and 17 times forward earnings. By those metrics, it's the second-cheapest stock among the "Magnificent Seven" tech companies, with Alphabet the only one trading at lower multiples. However, the highlights don't tell the whole story.
Why investors are worried
The primary concern with Meta is its huge AI spending. The company's costs and expenses jumped 55% year over year to $42 billion in the second quarter, contributing to its failure to meet earnings estimates. Earnings per share (EPS) came in at $6.18, a 13% year-over-year decrease, compared to analyst expectations of $7.14.
Meta also slightly raised its 2026 capital expenditure guidance to between $130 billion and $145 billion. The previous low end of the estimate was $125 billion. It's a minor adjustment in the grand scheme of things, but it does send a message that AI spending isn't slowing down.
Management, including CEO Mark Zuckerberg, hasn't provided much concrete information on the progress of its frontier AI models, either. The company has delayed multiple AI rollouts, including its Avocado system and Muse Spark model.
The concerns are valid, but so is the growth case
The company's AI spending is somewhat worrisome, especially given its model delays and the fact that it doesn't currently have a business to sell its computing capacity to, unlike the other hyperscalers investing heavily in AI. But the revenue growth rate is impressive for such a large company, and AI has reportedly already been driving higher ad impressions and more revenue per ad.
With that in mind, the current price could be a good buying opportunity. Wall Street analysts overwhelmingly see it as a buy, with a median one-year price target of $800, close to Mahaney's own forecast. While Meta will likely remain volatile, the strength of its business gives it substantial upside.
Lyle Daly has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Evercore, and Meta Platforms. The Motley Fool has a disclosure policy.