The average analyst 12-month price target for Meta Platforms‘ (NASDAQ: META) stock right now is $793. That’s about 47% above the current share price. And if it was to be hit, a $5,000 investment today could soon be worth about $7,350.

However, before you rush out to buy the stock on the back of that lofty price target, there are some things to know. Personally, I’d be very surprised if it can hit that price over the next year.

While the $793 forecast is eye-catching, investors need to be aware that many analysts are lowering their price targets at the moment. Since Meta’s Q2 results last Wednesday (29 July), more than 20 firms have cut their price targets.

Quite a few have gone to between $600-$650. That’s obviously a lot lower than $793.

Multiple red flags

The reason they’ve been doing this is that there were a number of red flags in the results. One was the fact that free cash flow collapsed 91% year on year to just $784m in the quarter.

Another was that the lower end of its 2026 AI capex guidance was bumped up. The company now expects to spend $130bn-$145bn this year versus previous guidance of $125bn-$145bn.

A third was that costs and expenses blew out – they jumped by 55% year on year. A fourth was that Reality Labs – the unit that includes the connected glasses – lost another $4.6bn.

On the positive side, revenue was up 28% year on year to $60.8bn. However, a key area of focus for analysts right now is AI spending and free cash flow so the results weren’t received well (the stock tanked after earnings).

We’ve seen this before

For me, there’s a sense of déjà vu here – it reminds me of a few years back when Meta was throwing a ton of cash at the metaverse. At the time, the stock was sinking.

It wasn’t until CEO Mark Zuckerberg reduced his spending on the metaverse – after an open letter from hedge fund manager Brad Gerstner – that sentiment towards the tech stock changed. Then its share price ripped.

An investment opportunity?

Now, we could see this scenario play out again. So the stock could be worth considering today. It does look pretty cheap. Looking at the earnings forecast for next year, the price-to-earnings (P/E) ratio is only 17.

However, I can’t help but feel that Alphabet, Amazon, and Microsoft are superior Mag 7 stocks. These companies all have more ways to make money.

While Meta’s planning to establish a cloud computing division to sell excess compute capacity, these three businesses all have powerful cloud divisions in operation today. This reduces risks associated with their AI spending.

Of course, there are no guarantees that these stocks will outperform Meta over the next few years. However, all are well off their highs as well, so I reckon they’re worth a closer look.

Should you invest £5,000 in Meta Platforms right now?

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Edward Sheldon owns shares in Amazon, Microsoft, and Alphabet