Metaplatforms stock rebounded sharply this week after the company unveiled a new artificial intelligence model, providing investors with fresh momentum after a period of legal troubles that led to the stock’s underperformance.
The stock rose about 9% on Wednesday, its biggest gain since January, buoyed by both the easing of geopolitical tensions and the launch of Muse Spark, the flagship model of the company’s new Meta Superintelligence Lab.
The stock rose another 2.6% in Thursday trading, rising even further.
The rally helped Meta recoup losses caused by a recent court ruling that held Meta liable for damages related to content on its platform.
Muse Spark signals a new push for AI
Muse Spark, previously codenamed Avocado, is Meta’s first major AI release since hiring Alexandr Wang and investing $14.3 billion in Scale AI.
The model is the first in Meta’s new Muse series and highlights the company’s ambition to compete more aggressively in the AI race.
Analysts said the announcement strengthens Meta’s position among major AI developers.
Bernstein’s Mark Schmulik said, “Muse Spark has clearly established Meta as an active and reliable participant in the model race alongside the leading players.”
JPMorgan analyst Doug Anmuth echoed that view, saying the announcement should “increase confidence in Meta’s expansionary trajectory and improve investor sentiment.”
The new model is expected to strengthen Meta’s core advertising business and open further monetization avenues across the ecosystem, including AI-driven services and messaging platforms.
Stocks remain undervalued despite gains
But despite the recent recovery, Meta’s stock price remains down about 11% over the past six months, reflecting increased capital spending and investor concerns about regulatory risk.
Evercore analysts said the stock remains undervalued.
“Despite the recent modest rally, Meta stock has been volatile, trading at a price-to-earnings ratio of 18 times, within about 10% of its bottom multiple over the past three years,” said Evercore ISI analyst Mark Mahaney.
He maintained an “outperform” rating on the stock with a price target of $900, suggesting an upside potential of about 43% from current levels.
Mahaney added that the launch of Muse Spark demonstrates Meta’s ability to turn large AI spends into tangible products that can drive long-term growth.
legal overhang cloud outlook
Even as the AI buzz gains momentum, legal risks continue to cloud the company’s prospects.
A recent court ruling found Meta liable for damages related to content on its platform, raising the possibility of further lawsuits.
The Wall Street Journal’s Dan Gallagher warned that the ruling could have broader implications.
“Hopes for a sharp recovery may be dashed by recent court decisions,” he wrote, pointing to the risk of a domino effect from thousands of pending lawsuits.
“While Meta has significant recourse to contest and appeal, the prospect of a protracted legal dispute could act as a brake on the stock price for some time,” he said.
He added that while the financial impact of the recent lawsuit ($6 million in damages) was minimal compared to Meta’s size, the legal findings themselves could have more significant consequences.
The ruling concludes that the company’s platform is designed to addict young users, a decision that could challenge long-standing legal protections under the Communications Decency Act.
Meta denied the allegations and said it plans to appeal.
