- Hedge funds favor Meta for strong ad growth, AI-driven product monetization, and rising operating efficiency with supportive Buy/Overweight targets around $850–$900.
- Meta trades near ~19–25× forward earnings, which bulls view as reasonable given ~20% revenue growth and margin expansion.
- Bears flag surging capex ($70–$72B in 2025 with more expected in 2026) as a potential free-cash-flow and earnings-quality drag.
- Positioning is split, with some funds adding (e.g., Coatue) while others cut sharply (e.g., Tiger Global) amid regulatory and valuation risks.
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Meta’s renewed appeal among hedge funds arises from a combination of strong fundamentals—especially rapid growth in ad revenue, the monetization of AI-enabled tools (such as Advantage+ and Meta AI), and operational efficiency—and favorable analyst ratings placing the stock at roughly 20–25× forward earnings multiples. Strategically, Meta is viewed as a top-tier play in the AI/AR hardware/software ecosystems, boasting a large user base (3½+ billion across its Family of Apps) and deep infrastructure investments that bulls argue are yielding measurable returns.
However, that bullish case is tempered by several risk factors. Meta plans $70–$72+ billion in capital expenditures in 2025, with a material increase expected in 2026. Such aggressive investment in infrastructure and AI talent has led some investors to question whether free cash flow will be under pressure. Meanwhile, regulatory issues—tariffs, EU Digital Markets Act, privacy constraints—remain existential variables, especially for ad-centric revenue models. Finally, valuation margins are narrowing; while 20%–25% growth at 20×+ earnings looks reasonable, it means the margin for error is slim if revenue growth slows or cost overruns materialize.
The behavior of major hedge funds underscores this tension. For example, Coatue increased its Meta stake in Q3 2025 to 7.27% of its portfolio, making it the single largest holding. In contrast, Tiger Global slashed its holdings by 62.6% in the same period. This divergence suggests Meta is no longer a unanimous pick but rather a stock where differentiated views on risk, execution, and valuation have become key. For a managing director or large institutional investor, this means constructing positions carefully with guardrails based on regulatory exposure, capital-spend efficiency, and clarity in AI product monetization.
Looking forward, key questions include: Can Meta sustain revenue growth amid rising regulatory headwinds and macroeconomic uncertainty? Will AI infrastructure spending produce new profitable revenue streams, or burden margins? How will investor sentiment shift if free cash flow dips or valuation multiples contract? And importantly, do current analyst targets adequately reflect both opportunity and downside risks? These considerations will shape whether Meta continues to attract hedge fund backing or becomes more polarizing within institutional portfolios.
Supporting Notes
- Wedbush analyst Scott Devitt reiterated a Buy stance on Meta on December 19, 2025, with a price target of $880, representing ~36% upside. Citizens reaffirmed an Outperform rating with a target of $900 (≈39% upside).
- Coatue Management, a tech-focused hedge fund, increased its Meta holding in Q3 2025 to 4.04 million shares ($3 billion), reaching 7.27% of its portfolio.
- Tiger Global Management reduced its Meta position by 62.6% in Q3 2025 to 2.8 million shares valued at $2.1 billion.
- Analyst Stephanie Link praised Meta for growing revenue ~20%, expanding operating margins by ~500 basis points and trading at ~21× forward earnings—a valuation she considers attractive given current growth.
- Meta’s 2025 capex expectation is $70B–$72B, with 2026 capex projected to be notably larger.
- Value-at-risk commentary: Michael Burry criticized Meta and other AI-heavy tech companies for long depreciation schedules on compute/networking equipment, estimating overstatement of Meta’s earnings by ~21% between 2026–2028.
- Wall Street concerns echo previous metaverse spending issues: Meta’s share price dropped nearly 17% in four days after capex disclosure, erasing ~$307 billion in market value.
- As of Q4 2024, approximately 262 hedge fund portfolios held Meta, up from ~235 the previous quarter; this puts META among the most popular future and AR/AI stocks according to hedge fund screeners.
- The forward P/E multiple for Meta is generally in the 19–25× range, below both its historical range and its Big Tech peers.
- Key risks identified include regulatory policy (e.g., tariffs, EU DMA), privacy changes affecting ad targeting (like Apple’s ATT), and dependence on ad revenue with limited enterprise AI channel exposure.