Frontier models and AI agents open up room for growth! The target price of Komoro Meta (META.US) is directly at $820

The Zhitong Finance App learned that Meta (META.US) shares have fallen 1% since this year, less than the 12% increase in the S&P 500 index during the year. However, Meta's stock price has now rebounded 20% from its recent low, while the S&P 500 index fell 1% during the same period. J.P. Morgan Chase pointed out in a recent research report that Meta's stock price still has considerable room to rise because the company is currently in the early stages of launching cutting-edge models and AI-driven products outside of the advertising business. Among them, Muse AI agents (AI agents) and Meta Model API access services are particularly noteworthy. Komo raised Meta's stock rating from “neutral” to “increased holdings,” and raised its target price from 640 US dollars to 820 US dollars in December 2027, which means that the stock will still have room to rise by about 30% by the end of next year.

Komo said in the report that the cutting-edge model will become the core of Meta's products and commercialization pipeline in the next few years, and will drive the company towards superintelligence. In the summer of 2025, when Meta began rebuilding Meta Superintelligence Labs (MSL), its goal was to deliver cutting-edge models within a year. The bank believes that the MSL team has basically achieved this goal, and the pace of model release is accelerating — from the launch of Muse Spark 1.1 in July this year to the recent launch of Muse Spark 1.3, which already has the ability to compete with Claude and GPT series models.

Komo anticipates that Meta's next-generation model (codenamed Watermelon) will unlock more opportunities for Meta in the fields of consumer products, business intelligence, FoA (application family) user engagement and advertising, and internal operations and efficiency. The bank has long believed that Meta has good conditions to provide consumer-driven AI products to a user base of around 4 billion, and that large-scale distribution capabilities are an important competitive advantage.

Meta's Muse AI smart has already achieved strong early growth momentum. On the second day of launch, it once rose to 3rd place in the US App Store ranking, and early usage reached 10 times that of the training group. Although commercialization has not been Muse's recent priority, Komo believes that it has significant opportunities in terms of raff/commission models as well as subscription models, and its potential total serviceable market (TAM) could reach tens of trillions of dollars.

Importantly, Muse is built around security and privacy, which is one of Meta's strengths. According to Komo, this could be a key obstacle for other agents to gain user trust and perform more complex tasks involving passwords, credit cards, and other personal information. Over time, the bank expects interaction between agents to become more common, and merchants and businesses will gain greater intelligence and greater transaction volume. As Muse gains more users, it will become an important use case for Meta computing resources, but the bank also believes that there are considerable opportunities for Meta Model API services for developers and enterprises.

As Meta's model capabilities are further enhanced from Muse Spark 1.3 to Watermelon and subsequent models, the appeal of Model API access services should continue to increase and drive further growth in usage, with highly competitive pricing support. Although Meta is currently highly focused on cutting-edge model construction and AI product development, Komo believes that its AI infrastructure production capacity is also highly valuable and will support future computing needs.

Meta has stated that the company will maximize the use of computing capacity in 2026 and 2027, and will have greater flexibility in 2028 and beyond. Komo expects Meta's capital expenditure to reach US$243 billion in 2027, an increase of 70% year on year; capital expenditure in 2028 will reach US$284 billion, an increase of 17% year over year, both significantly higher than market consensus. The bank believes that factors that may affect capital expenditure in 2028 include the progress of data center construction and the resistance it faces, the adoption rate and degree of commercialization of AI products, and supply restrictions.

Currently, Komo expects Meta to face greater free cash flow (FCF) pressure in 2027 and 2028, with an annual negative free cash flow of about US$65 billion to US$70 billion. At the same time, however, the bank has yet to include revenue from commercialization of new AI products in the forecast. More importantly, the bank believes that Meta's core advertising business still has huge room for growth. This is mainly due to AI-driven content recommendations and increased user engagement, more accurate ad targeting and search, and improvements in AI content creation.

Overall, Komo believes that Meta's large-scale distribution capabilities and user engagement continue to drive network effects, and its ability to target ads accurately provides great value to advertisers. The company is making significant improvements through AI-driven ad ranking and recommendation capabilities, thereby driving higher user engagement, higher return on ad spend (ROAS), and revenue growth. According to Komo, the company has shown a credible path and is expected to commercialize its AI-driven capital expenditure through smart devices for consumers and enterprises, as well as Model API access services.