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Meta Platforms (META) stock soared on July 1 following a Bloomberg report that the tech behemoth plans on launching its own cloud infrastructure business dubbed Meta Compute.
As investors cheered the news, META ripped through its major moving averages (20-day, 50-day, and 100-day), indicating bulls have taken control across multiple timeframes.
Despite today’s surge, however, Meta shares remain down about 5% year-to-date.
Significance of the New Business for Meta Stock
The expected launch of Meta Compute is bullish for the giant’s share price as it addresses a major concern regarding its growing capital expenditures.
Meta Platforms has guided for as much as $145 billion in capex for the current year to fund its state-of-the-art artificial intelligence (AI) data centers and hardware.
But the Nasdaq-listed firm may now begin renting out its cutting-edge computing muscle to third-party enterprise clients, transforming what the market previously viewed as a cash incinerator into a high-margin revenue generator.
Note that META stock also currently pays a small dividend yield of 0.34%, which makes it even more attractive, at least for income-focused investors.
BMO Sees Significant Upside in META Shares
The Bloomberg report also had BMO analysts reiterate their bullish view on META shares today.
While their rating on the tech giant remained at “Market Perform,” the $720 price target indicates potential upside of more than 15% from current levels.
According to them, the Meta Compute segment would be an incremental positive for the behemoth, creating a much clearer, immediate path for it to realize a tangible return on its rather aggressive infrastructure investments.
Crucially, the multinational is currently trading at a forward price-to-earnings (P/E) ratio of about 19x only, which makes it notably cheaper to own than many of its artificial intelligence peers.
How Wall Street Recommends Playing Meta Platforms
Despite its muted year-to-date performance, Wall Street analysts have not thrown in the towel on Meta stock.
According to Barchart, the consensus rating on Meta Platforms remains at “Strong Buy,” with the mean price target of $822 indicating potential upside of more than 30% over the next 12 months.
