Is It Time to Buy Meta? Morgan Stanley: Market Pessimism Has Bottomed

TradingKey - Morgan Stanley ( MS) analyst Brian Nowak explicitly stated in a research report released on March 29 that market pessimism toward Meta ( META) has bottomed out. The current valuation levels have created a rare tactical buying window; consequently, the firm named Meta its top pick in the internet sector and maintained an Overweight rating.

Despite lowering Meta's price target from $825 to $775 due to macroeconomic concerns, Nowak noted that at current share prices of approximately $526-$536, there remains roughly 45%-50% upside. This price target corresponds to approximately 21 times 2027 price-to-earnings (P/E), which is essentially in line with Meta's historical average.

The report shows that, impacted by the combined effects of GenAI ROI uncertainty, macro volatility, and regulatory clouds, Meta is currently trading at approximately 15 times 2027 forward earnings per share (EPS). This is not only one standard deviation below its 10-year mean but also marks the fourth time in the past decade such undervaluation has occurred.

On a comparative basis, Meta's 2027 PEG ratio is approximately 0.9x, representing a more than 54% discount to the 2.0x PEG median of Big Tech peers like Apple and Microsoft. Even at the $775 price target, its PEG would still trade at a 33% discount to the peer average, while Meta's 2025-2027 EPS compound annual growth rate (CAGR) is projected at 16%, higher than the peer median of 10%.

Morgan Stanley believes these negative factors are fully priced in. Combined with expectations for the launch of potential AI products, now is the time for a tactical entry into Meta. The firm also provided a bull-case price target of $1,000 and a bear-case target of $450, implying a potential upside of approximately 90%.

Meta recently lost two minor safety cases in New Mexico and Los Angeles, incurring approximately $380 million in legal fines. This development has injected new uncertainty into the stock and led investors to worry whether the company's advertising business model will face stricter regulation.

However, Nowak believes regulatory risks are overstated. Especially within the context of geopolitical competition surrounding the AI race, the U.S. government is more inclined to support Meta becoming a global AI leader. He expects prudent future legislation that balances social media accessibility with proposals that could materially harm Meta.

With Meta's stock down 19% year-to-date and its valuation reaching levels seen only three times in the past decade, Nowak firmly maintains that "now is the time to buy Meta."

Morgan Stanley's Bull Case for Meta

The core of Nowak’s bullish thesis on Meta lies in its potential AI agent product, MetaClaw, which he believes represents a multi-billion dollar market opportunity for the company.

MetaClaw will be built on Manus' technology and a more powerful version of the Llama LLM, integrating with Moltbook to create a connected user middleware. This, combined with Meta's 3.5 billion daily active users (DAUs) across platforms like Facebook and Messenger, 250 million merchants, and over 10 million advertisers, aims to build a closed-loop AI agent shopping and service platform.

Meta is currently testing the integration of Gmail and Google Calendar into its agent products. Although it lacks an independent browser entry point, the inventory and payment capabilities of its 250 million merchants already form the underlying infrastructure for "agentic shopping."

Once MetaClaw is launched, it will extend Meta's monetization capabilities from ad impressions to a transaction loop, driving long-term search-like revenue growth. Meanwhile, Meta is also building fully automated ad agent tools for small and medium-sized enterprises (SMEs) to further capture a larger share of advertiser budgets.

In the core advertising business, Morgan Stanley's forecasts are conservative yet still above market expectations. Ad revenue for 2026 and 2027 is projected to grow by approximately 28% and 21%, respectively, corresponding to revenues of about $257.5 billion and $311.6 billion—3% to 5% higher than consensus. This view is supported by the accelerating expansion of user time spent across Meta's apps and the traffic monetization potential from an increasing mix of video content.

On the product pipeline front, Meta has 10 features set to launch in 2026, including LLM-driven content recommendation optimization, WhatsApp ad placement expansion, and Threads ads entering the US, European, and Brazilian markets. Growth visibility for the core business remains clear over the next 1-2 years. In 2027, LLMs will also be utilized to analyze native data to enhance ad signal precision.

Meta's pursuit of a 20% headcount reduction plan is also seen as a positive signal by Morgan Stanley, providing a margin of safety for EPS. Cutting approximately 15,773 roles—with annual per-capita costs estimated at $200,000 to $600,000—could yield annual savings of $3.15 billion to $9.46 billion. This equates to 3% to 9% of forecasted 2027 EBIT and could contribute over $1 in additional EPS.

Notably, Morgan Stanley's 2027 EPS forecast of $36.31 does not yet include these cost savings. If the layoffs are implemented, earnings certainty will further improve.

Morgan Stanley also identified May and September 2026 as key catalyst windows for Meta's stock price.

In May, Meta is expected to host its LlamaCon AI developer conference, where it may release the latest models and product updates; the annual Connect developer conference in September remains the core venue for Meta's technology roadmap announcements. The rollout of MetaClaw-related capabilities at these two junctures will drive the market to re-evaluate Meta's ROI and propel valuation recovery.