The analyst sees continued potential in Meta's AI business, but says Muse would need continued product innovation to develop more use cases and daily user habits.
- Morgan Stanley reiterated its ‘Overweight’ rating on Meta stock and raised its price target to $820 from $775.
- Muse continues to attract about 300,000 U.S. downloads daily, but 14-day user retention remains around 20%.
- Meta is scheduled to report third-quarter results after the closing bell on Wednesday.
Meta Platforms (META) shares were in the spotlight on Monday as Morgan Stanley raised its price target on the company, flagging concerns about user retention for its artificial intelligence (AI) agent Muse.
Morgan Stanley reiterated its ‘Overweight’ rating and increased its price target to $820 from $775, according to CNBC. However, the firm noted that Muse's daily active users were not growing as quickly as downloads.
As of this writing, META stock traded nearly 1% lower.
Room For Meta Muse To Improve
While Muse is still capturing around 300,000 new downloads in the U.S. per day, Daily Active Users (DAUs) aren't scaling as quickly, with 14-day retention at ~20%, Morgan Stanley said.
The firm said the trend was unsurprising given the early stage of the agentic AI market, but emphasized that Muse would need continued product innovation to develop more use cases and daily user habits.
The distinction matters because initial downloads measure interest in the product, while retention indicates whether consumers continue using it after installation.
Meta launched Muse in September, drawing investor attention to the company's efforts to develop a consumer-facing AI business beyond its established advertising operations. Last week, Meta also introduced its Muse Wonder models, designed to handle more complex personal and professional AI tasks.
Meta’s Upcoming Earnings Put AI Spending In Focus
Meta is scheduled to report third-quarter results after the closing bell on Wednesday. Investors will be watching whether growing AI investment is translating into stronger financial performance and sustained user engagement.
In the fiscal second quarter (Q2), Meta's revenue rose 28% year over year to $60.8 billion, although its operating margin narrowed to 31% from 43% a year earlier. The company guided for third-quarter revenue of $61 billion to $64 billion.
It also projected full-year capital expenditures, including principal payments on finance leases, of $130 billion to $145 billion. The results will provide investors with an opportunity to assess Meta's spending plans and any updates on Muse adoption, retention and monetization.
What Retail Thinks of Meta Stock
On Stocktwits, retail investors’ sentiment around META stock remained in the ‘bearish’ territory.
So far this year, META stock has risen over 8%. In comparison, the Vanguard Morningstar Total Stock Mkt ETF (VTI) and the Invesco QQQ Trust, Series 1 (QQQ), which hold the stock, have rallied around 12% and 18%, respectively, during this period.
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