Citi has placed Meta Platforms, Inc. (NASDAQ:META) on a 90-day upside catalyst watch ahead of Connect, expecting new AI product announcements to provide validation for the company’s years of aggressive investment. The upcoming event could provide an important short-term catalyst. However, it follows a second-quarter earnings report that suggested investors are becoming less willing to ignore the financial cost of that spending. Shares fell nearly 10% despite strong advertising growth, as capital expenditures absorbed 98% of operating cash flow and free cash flow dropped to below $1 billion. As a result, even a well-received Connect presentation may not fully address the financial pressures that are already shaping how the market values META.
Citi Sees Connect as a Catalyst for Meta’s AI Story
Ahead of Meta’s September 23 Connect event, Citi placed the stock on a 90-day upside catalyst watch while maintaining its Buy rating and a $800 price target. Analyst Ronald Josey expects the company to provide updates on Muse, its next-generation AI models, and its smart glasses strategy. He pointed to Meta’s accelerating product cadence and early adoption of Muse as signs of progress. Ronald Josey also highlighted the growing number of AI use cases spanning business, personal, and enterprise applications. Citi sees improving Reels monetization, continued advertising innovation, and the company’s large user base as key pillars supporting its valuation. At the same time, the firm identified weaker advertising spending, regulation, competition, and a smaller contribution from non-advertising businesses as the main risks to its price target.
Capex Is Driving the Stock More Than Products Are
Despite strong advertising growth, Meta shares fell nearly 10% after the company reported its second-quarter results. The decline came as expenses jumped 55% year over year, while free cash flow fell to only $784 million. Capital spending reached $31.1 billion, representing 98% of operating cash flow, while full-year 2026 capex is still guided to $130 to $145 billion. Meanwhile, Reality Labs has accumulated more than $90 billion in losses since 2020. Unlike Microsoft or Amazon, Meta does not have a cloud business generating offsetting revenue to support spending at this level.
Citi has identified several specific developments at Connect that could act as catalysts for Meta. However, the market’s reaction to the company’s last two earnings reports suggests that investors are paying closer attention to the direction of capital spending than to new product announcements. As a result, even a strong Connect event may not answer the bigger question of when Meta’s heavy investment in AI and other initiatives will begin generating meaningful returns.
Meta saw a modest decline in hedge fund ownership, with the number of funds holding the stock falling from 262 at the end of Q1 2026 to 254 at the end of Q2 2026. At the same time, short interest stood at just 1.31% of float as of August 31, 2026. Overall, the figures point to broadly stable institutional conviction heading into Connect, with some signs of cooling.
READ NEXT: Gemini 3.8 Live’s Extended Thinking Model Beats OpenAI and xAI, Barely, and Maybe Briefly and Saudi Arabia’s $5.75 Billion Potential Arms Sales: What It Means for Boeing and Honeywell Aerospace
