Morgan Stanley raises Meta's target price to $850, driven by GPU algorithm optimization exceeding profit expectations

According to the Zhitong Finance APP, Meta Platforms Inc. (META.US), one of the recently discussed artificial intelligence concept stocks on Wall Street, has once again attracted market attention. On July 31, Morgan Stanley analyst Brian Nowak released the latest research report, raising Meta's target price from $750.00 to $850.00, while maintaining an "overweight" rating.

The report pointed out that Meta's continuous improvements in GPU algorithms are becoming a key factor driving its user engagement and profitability levels beyond expectations. This technological advantage has been fully validated in the company's actual performance for the second quarter and its performance guidance for the third quarter. Specifically, the optimization of GPU-supported algorithms not only enhances user interaction experience but also directly boosts monetization efficiency, exceeding previous market expectations.

Data shows that Meta's revenue for the second quarter was $47.52 billion, a year-on-year increase of 22%, better than market expectations; diluted earnings per share were $7.14, a year-on-year increase of 38%, also better than market expectations. Meta expects third-quarter revenue to be between $47 billion and $50.5 billion, with the midpoint of this range exceeding the average analyst expectation of $46.2 billion.

In addition, Meta has raised the lower limit of its capital expenditure forecast range for 2025, as the company continues to invest heavily in talent, infrastructure, data centers, and energy to maintain competitiveness in the rapidly evolving artificial intelligence race. The company currently expects its spending this year to be between $66 billion and $72 billion.

Based on the recognition of Meta's technology-driven profitability, Morgan Stanley has adjusted its financial expectations for the next two years: it expects 2025 revenue to be raised by about 3% from the original forecast, and the revenue increase for 2026 to expand to 4%; during the same period, earnings per share (EPS) are expected to grow by 5% and 9%, respectively, with growth momentum mainly coming from operational efficiency improvements brought about by algorithm optimization.

The report further emphasizes that Meta is currently increasing its investment in core businesses and long-term projects simultaneously. Notably, the continuous improvement of its core business not only provides stable financial support for long-term strategic projects but also further solidifies profitability through technological iteration and operational optimization, forming a virtuous cycle of "core business feeding back into long-term layout." The clarity of this strategic layout has become an important basis for Morgan Stanley's target price increase