Roth Capital: Meta's Cloud Business Plan Boosts Stock by 10%
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Roth Capital analyst Rohit Kulkarni notes that according to news reports, Meta (META) is building a cloud unit to sell excess AI compute, spanning an AWS (AMZN) Bedrock-style hosted-model track and raw GPU capacity that competes with neoclouds. Meta's shares rose as much as 10% intraday, while CoreWeave (CRWV) and Nebius (NBIS) each fell roughly 12%-15%. The firm views the neocloud reaction as an overreaction on a still unconfirmed, capacity-gated plan, and it would be a buyer of CoreWeave on this weakness. Specifically, on Meta, the firm sees potential revenue diversification into Cloud and Subscriptions as a clear positive, with 98% revenues coming from advertising.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 582.900
Low
655.15
Averages
824.71
High
1117
Current: 582.900
Low
655.15
Averages
824.71
High
1117
About META
Meta Platforms, Inc. is building human connections, powered by artificial intelligence and immersive technologies. The Company's products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) and mixed reality (MR) headsets, augmented reality (AR), and wearables. It also helps people discover and learn about what is going on in the world around them, enabling people to share their experiences, ideas, photos, videos, and other content with audiences ranging from their closest family members and friends to the public at large. The Company's segments include Family of Apps (FoA) and Reality Labs (RL). FoA segment includes Facebook, Instagram, Messenger, WhatsApp and Threads. RL segment includes its virtual, augmented, and mixed reality related consumer hardware, software and content. Its product offerings in VR include its Meta Quest devices, as well as software and content available through the Meta Horizon Store.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- AI Infrastructure Expansion: Meta Platforms has aggressively built AI infrastructure over the past few years, particularly for training its Llama models, with capital expenditures expected to exceed $145 billion in 2026, indicating the company's ongoing investment and growth potential in the AI sector.
- New Revenue Stream: Meta may create a new revenue stream by renting out its excess computing capacity, a strategy similar to SpaceX's successful model, which could generate over $2 billion in monthly revenue, highlighting the profitability potential of this market.
- User Growth Challenges: Despite attracting over 3.5 billion users daily across its social media apps, Meta is addressing stagnant advertising growth by enhancing user engagement through AI, which helps increase ad revenue and mitigates growth stagnation in its advertising business.
- Attractive Market Valuation: With a current P/E ratio of 21.2, which is 25% lower than its 10-year average, Meta's stock appears undervalued, suggesting that investors may consider long-term investment despite uncertainties surrounding its potential cloud business.
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- Revenue Growth Potential: The growing demand for therapeutics in endocrine diseases provides Vertex with a clear runway for double-digit revenue growth in the coming years, with Crinetics in the portfolio further solidifying its market position.
- Strong Market Performance: Since February 2022, Vertex's stock has outperformed the S&P 500 by 45%, demonstrating strong investor appeal, particularly in the current market environment.
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- Significant Valuation Fluctuations: Although SpaceX's valuation approached $3 trillion post-IPO, it has since retraced to $2.13 trillion as of July 2, with a share price still 20% above its IPO listing, reflecting cautious market sentiment regarding its future performance.
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- Massive Contract Expansion: CoreWeave expanded its agreement with Meta in April 2023 to provide cloud computing capacity through 2032, valued at $21 billion, while Nebius announced in March it would provide $12 billion in cloud capacity, showcasing the strong collaborative potential in the AI data center sector.
- Sustained Demand Growth: Despite the competitive threat from Meta, demand for AI data centers from CoreWeave and Nebius remains robust, with CoreWeave noting that its 2026 capacity is largely sold out and 30% of its $99.4 billion revenue backlog comes from foundational AI labs, indicating urgent market demand for their services.
- Investment Opportunity Emerges: Although Meta's plans could impact CoreWeave and Nebius, the demand for AI data centers far exceeds supply, making the current stock price pullback a buying opportunity, particularly as CoreWeave's price-to-sales ratio is only 6.6, indicating potential investment value.
See More
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- Market Performance Volatility: Although the company's market cap briefly approached $3 trillion post-IPO, it retraced to $2.13 trillion by July 2, with a share price still 20% above the IPO price, reflecting investor caution regarding long-term performance.
- Lockup Period Challenges: SpaceX's staggered lockup schedule allowed only about 5% of shares to be sold initially, with a significant number of insiders expected to sell their shares in the coming months, which could exert downward pressure on the stock price.
- Valuation Risks: With a current price-to-sales ratio of 114, significantly above the historical threshold of 30, SpaceX faces substantial challenges in sustaining profitability, leading to market expectations that its stock price may fall below $100 before the end of 2026.
See More
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- Shifting Customer Dynamics: CoreWeave's agreement with Meta has been extended to 2032, valued at $21 billion, while Nebius has committed to providing $12 billion in cloud computing capacity, highlighting the importance of their business relationships despite increased competition.
- Strong Demand Continues: CoreWeave's AI cloud platform demand is nearing saturation for 2026, with 30% of its $99.4 billion revenue backlog coming from foundational AI labs, showcasing its robust market position and growth potential.
- Optimistic Industry Outlook: According to Goldman Sachs, U.S. data center power demand is projected to double to 66GW by 2027, indicating that the demand for AI data centers will continue to grow, positioning CoreWeave and Nebius to benefit from this trend.
See More
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- AI Infrastructure Expansion: Meta Platforms has aggressively built AI infrastructure over the past few years, particularly for training its Llama models, with capital expenditures expected to exceed $145 billion in 2026, indicating the company's ongoing investment and growth potential in the AI sector.
- New Revenue Stream: Meta may create a new revenue stream by renting out its excess computing capacity, a strategy similar to SpaceX's successful model, which could generate over $2 billion in monthly revenue, highlighting the profitability potential of this market.
- User Growth Challenges: Despite attracting over 3.5 billion users daily across its social media apps, Meta is addressing stagnant advertising growth by enhancing user engagement through AI, which helps increase ad revenue and mitigates growth stagnation in its advertising business.
- Attractive Market Valuation: With a current P/E ratio of 21.2, which is 25% lower than its 10-year average, Meta's stock appears undervalued, suggesting that investors may consider long-term investment despite uncertainties surrounding its potential cloud business.
See More
Vertex Acquires Crinetics for $10 Billion to Expand Rare Disease Portfolio
- Acquisition of Crinetics: Vertex Pharmaceuticals is acquiring Crinetics Pharmaceuticals for $10 billion, aiming to expand its business into endocrine diseases, with the potential to add up to $5 billion in annual revenue over the long term, although the market reacted negatively in the short term, pushing the stock down about 2%.
- Strategic Fit: Vertex CEO Reshma Kewalramani praised the acquisition as an excellent strategic fit, as Crinetics focuses on serious diseases in specialty markets with significant unmet needs, and it is expected to contribute revenue immediately through the ongoing launch of the Palsonify medicine.
- Revenue Growth Potential: The growing demand for therapeutics in endocrine diseases provides Vertex with a clear runway for double-digit revenue growth in the coming years, with Crinetics in the portfolio further solidifying its market position.
- Strong Market Performance: Since February 2022, Vertex's stock has outperformed the S&P 500 by 45%, demonstrating strong investor appeal, particularly in the current market environment.
See More
SpaceX IPO Sets Record but Faces Challenges Ahead
- Record IPO Financing: SpaceX raised $85.7 billion in its IPO, nearly tripling Saudi Aramco's previous record of $29.4 billion, demonstrating strong market confidence in its AI and space infrastructure ventures.
- Significant Valuation Fluctuations: Although SpaceX's valuation approached $3 trillion post-IPO, it has since retraced to $2.13 trillion as of July 2, with a share price still 20% above its IPO listing, reflecting cautious market sentiment regarding its future performance.
- Complex Lockup Period: SpaceX sold only about 5% of its outstanding shares in its IPO, with the float expected to increase rapidly in the coming months as insiders become eligible to sell, potentially exerting downward pressure on the stock price.
- High Valuation Risks: With a current price-to-sales ratio of 114, significantly above the historical average of 30, SpaceX's stock faces substantial correction risks, particularly amid fluctuating market emotions and investor sentiment.
See More
Meta's Plans to Compete in Cloud Computing Market Impact Neocloud Providers
- Stock Price Volatility: Following news of Meta's plans to enter the cloud computing market, CoreWeave's stock plummeted nearly 14% in a single day, while Nebius dropped 17%, reflecting market concerns about the future prospects of both companies, especially with Meta as a customer.
- Massive Contract Expansion: CoreWeave expanded its agreement with Meta in April 2023 to provide cloud computing capacity through 2032, valued at $21 billion, while Nebius announced in March it would provide $12 billion in cloud capacity, showcasing the strong collaborative potential in the AI data center sector.
- Sustained Demand Growth: Despite the competitive threat from Meta, demand for AI data centers from CoreWeave and Nebius remains robust, with CoreWeave noting that its 2026 capacity is largely sold out and 30% of its $99.4 billion revenue backlog comes from foundational AI labs, indicating urgent market demand for their services.
- Investment Opportunity Emerges: Although Meta's plans could impact CoreWeave and Nebius, the demand for AI data centers far exceeds supply, making the current stock price pullback a buying opportunity, particularly as CoreWeave's price-to-sales ratio is only 6.6, indicating potential investment value.
See More
SpaceX IPO Raises Record $85.7 Billion
- Record IPO Financing: SpaceX's IPO on June 12 raised an unprecedented $85.7 billion, nearly tripling Saudi Aramco's previous record of $29.4 billion, indicating strong market confidence in its future potential.
- Market Performance Volatility: Although the company's market cap briefly approached $3 trillion post-IPO, it retraced to $2.13 trillion by July 2, with a share price still 20% above the IPO price, reflecting investor caution regarding long-term performance.
- Lockup Period Challenges: SpaceX's staggered lockup schedule allowed only about 5% of shares to be sold initially, with a significant number of insiders expected to sell their shares in the coming months, which could exert downward pressure on the stock price.
- Valuation Risks: With a current price-to-sales ratio of 114, significantly above the historical threshold of 30, SpaceX faces substantial challenges in sustaining profitability, leading to market expectations that its stock price may fall below $100 before the end of 2026.
See More
Meta Enters AI Data Center Market, Impact on CoreWeave and Nebius
- Increased Competition: Meta's plan to enter the AI data center market led to a 14% and 17% drop in CoreWeave and Nebius shares respectively, indicating market concerns over new competition that could impact future revenue growth for both companies.
- Shifting Customer Dynamics: CoreWeave's agreement with Meta has been extended to 2032, valued at $21 billion, while Nebius has committed to providing $12 billion in cloud computing capacity, highlighting the importance of their business relationships despite increased competition.
- Strong Demand Continues: CoreWeave's AI cloud platform demand is nearing saturation for 2026, with 30% of its $99.4 billion revenue backlog coming from foundational AI labs, showcasing its robust market position and growth potential.
- Optimistic Industry Outlook: According to Goldman Sachs, U.S. data center power demand is projected to double to 66GW by 2027, indicating that the demand for AI data centers will continue to grow, positioning CoreWeave and Nebius to benefit from this trend.
See More
