META is our top mega-cap stock pick, this analyst says

Roth Capital Markets analyst Rohit Kulkarni maintained a “Buy” rating and raised his 12-month target to US$835.00 for Meta Platforms (Meta Stock Quote, Chart, News, Analysts, Financials NASDAQ:META) in an Oct. 16 earnings preview, calling the stock his top mega-cap pick heading into year-end, followed by Amazon and Alphabet.

Kulkarni noted Meta will report third-quarter results on Oct. 29 after market close and that he expects upside to Street estimates, with fourth-quarter guidance potentially “bracketing 20% year-over-year growth at the high end.” He argued that the recent underperformance versus AI leaders, driven by OpenAI’s announcements and investor concerns about Meta’s 2026 AI spending ramp, represents a buying opportunity.

“We’d be incremental buyers of META shares amidst ongoing underperformance versus other AI winners,” he said. “At current levels, the risk/reward remains attractive given continued revenue acceleration from new ad models and the company’s unmatched compute scale.”

He cited Andromeda and GEM, Meta’s new AI-driven ad-optimization systems, as key catalysts for near-term performance.

“Andromeda (ads retrieval) and GEM (ads ranking) should be fully deployed across Facebook and Instagram by the second half of 2025,” he said. “Andromeda’s rollout has already lifted conversions by 4% on Facebook Mobile Feed and Reels, while GEM has driven a 5% increase on Instagram and 3% on Facebook Feed.”

The combination, he said, should translate to improved ad placement and higher CPMs, boosting ad wallet share through 2025.

While acknowledging a lacklustre showing at Meta Connect, where new AR glasses, neural band, and VR headset demos encountered technical issues, Kulkarni said the event reaffirmed the company’s long-term focus on new interaction platforms for digital media.

“The hardware-software stack isn’t close to mass adoption yet,” he said, “but Meta’s persistence in developing new form factors remains a strategic advantage.”

He also noted investor concern around rising capital expenditures, particularly tied to the Prometheus AI cluster under construction in Ohio and the planned 5-GW Hyperion expansion.

“Compute demand continues to exceed supply in both Meta’s core workloads and AI labs,” he said. “Even with recent multiyear cloud agreements, over US$10-billion with Google and US$14.2-billion with CoreWeave, we think 2025E and 2026E CapEx could rise further.”

Kulkarni added that Meta’s “AI Avengers” initiative, combining its TBD Lab, FAIR, Product & Applied Research, and MSL Infra teams, underscores its ambitions to regain leadership in foundational AI models.

“We still view Meta as an AI winner,” he said. “Rejoining the frontier-model race may be the most direct path to controlling its long-term destiny.”

Kulkarni said that Meta should post US$100.3-billion in Adjusted EBITDA on revenue of US$196.6-billion in fiscal 2025, improving to US$117.9-billion on revenue of US$231.2-billion in fiscal 2026.

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