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Investing.com -- DA Davidson analysts said in a note Wednesday that Meta Platforms (NASDAQ:META) must act decisively on spending to win back investor confidence after recent setbacks in digital advertising and artificial intelligence.
In a note published Wednesday, DA Davidson said Meta’s share price decline has been “appropriately driven” by deteriorating conditions in the ad market and the underwhelming launch of its Llama 4 AI model.
“We believe recent negative developments have appropriately driven META shares down, and that for shares to recover management will need to react quickly on expenses and capex,” the firm wrote.
DA Davidson warned that slowing U.S. consumer demand and a cut in ad growth forecasts by Madison & Wall, from 4.5% to 3.6%, could weigh heavily on Meta’s core business.
In addition, the firm cited regulatory and geopolitical risks, including the end of de-minimis exemptions for imports and ongoing Department of Justice efforts to break up Instagram and WhatsApp.
The note also questioned Meta’s leadership in AI. “We are reconsidering one of our core theses on META — the leadership in open source AI — after the failed introduction of Llama 4,” analysts said, adding that “Meta has fallen behind in the frontier AI race, ceding its position as the open-source leader to DeepSeek, Qwen, and others.”
DA Davidson emphasized that management needs to rein in spending to retain a positive outlook on the stock.
“For us to remain positive on META from here, we expect management to indicate another ‘year of efficiency’ as they did in 2023,” the note said.
DA Davidson’s Buy rating and $650 price target are currently under review ahead of Meta’s earnings call.