Why Meta Stock Is Down Today and Why RBC Says ‘There’s Still Much to Like’

Meta Platforms (NASDAQ:META) shares are down about 8% this morning following a first-quarter earnings report that left investors uneasy about the near-term outlook. The results themselves were solid, but the reaction reflects concerns about what lies ahead, as slower expected growth and heavier spending plans begin to weigh more heavily on sentiment.

Digging into the details, Meta reported Q1 EPS of $10.44, beating the Street by $3.78, although the figure was boosted by a sizable tax benefit, making the underlying beat less pronounced. Revenue reached $56.31 billion, topping the Street by roughly $760 million. Advertising trends remained healthy, with ad impressions rising 19% year over year and the average price per ad increasing 12%, helping drive solid top-line growth.

However, the outlook is where sentiment starts to weaken. The company guided Q2 revenue to a range of $58 billion to $61 billion, compared with consensus of about $59.6 billion. At the same time, spending remains elevated, with management pointing to higher component costs and infrastructure buildout as key drivers. CFO Susan Li said the company now expects 2026 capital expenditures to reach $125 billion to $145 billion, up from a prior $115 billion to $135 billion range.

RBC analyst Brad Erickson acknowledges that the current setup “isn’t a recipe for success” in the near term, pointing to the combination of moderating growth and heavier investment as a more challenging backdrop. The analyst also suggests that, given the trajectory of free cash flow and the scale of spending, it becomes “hard to argue for multiple expansion” at this stage.

At the same time, Erickson remains constructive on the bigger picture, describing the current phase as “a bit of a cooling off period given the tougher comps/decel,” while emphasizing that “there’s still much to like” when stepping back from the near-term noise. He sees Meta continuing to deliver “industry-leading growth at scale,” which, in his view, supports the broader investment case despite the near-term pressures.

Erickson highlights Meta’s push into a deeper platform ecosystem, where businesses are not just advertising but increasingly building and operating using Meta’s AI capabilities. The analyst points to the company “wading into” what he describes as a “Born on Meta” model, where businesses rely on its tools and compute infrastructure, opening the door to new monetization paths beyond traditional advertising.

Erickson also points out early signs that these efforts are gaining traction, noting that engagement between users and businesses has expanded significantly, which he views as an encouraging indicator of future revenue opportunities. Combined with ongoing improvements across Meta’s AI models, which are helping drive better ad performance and conversion rates, the analyst believes the company is laying the groundwork for sustained growth.

More broadly, Erickson sees the elevated investment cycle as a strategic move rather than a setback. While he concedes that higher spending and moderating growth complicate the near-term picture, the analyst points to “solid evidence of frontier model development and rising optionality with new SMB use cases” as reasons to stay constructive on the long-term thesis.

To this end, Erickson assigns Meta shares an Outperform (i.e., Buy) rating, while his $810 price target implies about 32% upside from current levels. (See Erickson’s track record, click here)

The broader Wall Street view remains supportive despite the post-earnings drop. Meta still carries a Strong Buy consensus rating, with the vast majority of analysts recommending the stock and very few sitting on the sidelines. Price targets cluster well above current levels, with an average standing at $831.61, implying about 24% upside from Wednesday’s closing price. (See META stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.