Meta: Firm’s Scale and Prowess in Digital Advertising Is Hard to Match

We are raising our fair value estimate for wide-moat Meta to $560 from $450 after taking a fresh look at the firm’s overall business and incorporating a more optimistic outlook on the firm’s investments in artificial intelligence, especially as they relate to Meta’s ability to improve its ad-targeting business. While the firm’s investments in AI could potentially improve its core business, we remain pessimistic on the long-term value created by Meta’s investments in its Reality Labs division and are reducing our Morningstar Capital Allocation Rating to Standard from Exemplary.