JPMorgan Chase significantly raises its target price for Meta, optimistic about Muse's monetization path.

Meta's AI assistant Muse is moving from concept to commercialization, prompting Wall Street to restructure its valuation logic accordingly.

According to TrendFocus, JPMorgan Chase released a research report following the Meta Connect conference, raising its target price for Meta Platforms from $820 to $920 and maintaining an "overweight" rating. As of the report's release date, Meta's stock price was $744.10. The core driver of this upward revision is the increasingly clear monetization path for Muse—Meta CEO Mark Zuckerberg explicitly stated at Connect that the company will charge a small fee for transactions completed through Muse in the future, marking a substantial shift in Muse's monetization model from a subscription-based system to a transaction commission-based system.

In a report, JPMorgan analyst Doug Anmuth pointed out that with the rapid expansion of the Muse Connector ecosystem and the upcoming release of the cutting-edge Watermelon model, Meta is building a new growth curve that could reach trillions of dollars outside of its core advertising business. This target price adjustment is based on a price-to-earnings ratio of approximately 26 times the projected 2028 GAAP earnings per share of $35.44, a significant increase from the previously used 23 times.

Muse's monetization path is clear, and its revenue-sharing model is comparable to that of advertising.

The core logic of Muse's business model is gradually taking shape. A JPMorgan report points out that Muse's monetization scale is currently limited, or only involves a small number of heavy-use subscriptions, but Zuckerberg reiterated at Connect that Meta will charge a small fee on transactions that occur on the platform over time.

The report argues that Muse Connector is a key infrastructure for streamlining the monetization chain. Connector allows Muse to connect with external websites, applications, and merchants, and has already received over 2,000 integration applications. At the Connect conference, Meta announced integration partnerships with Walmart, Best Buy, Sephora, and Wayfair, adding to the existing partnerships with OpenTable, Spotify, Ticketmaster, Peloton, Expedia, and Instacart. Meta also launched the Muse Connector platform, opening its interface to developers and allowing them to integrate their own applications and services into the Muse ecosystem.

JPMorgan Chase anticipates that as tens or even hundreds of millions of merchants eventually deploy their own agents on Muse, transactions on the platform will increasingly be completed through agent-to-agent interactions, rather than traditional browsing or telephone methods. At that point, Meta can charge a percentage or commission based on transaction volume, or adopt a target-oriented pricing model similar to its existing advertising business, tailored to the specific business objectives of merchants. The bank believes this monetization logic is highly similar to the underlying framework of Meta's advertising business, making it suitable for scalable replication.

With the Watermelon model imminent, API commercialization opens up new possibilities.

JPMorgan Chase predicts that Watermelon, Meta's most powerful cutting-edge model, will be released in the coming weeks. The report argues that the launch of Watermelon will enhance Meta's AI commercial value in two ways: firstly, by directly improving Muse's product performance through enhanced inference capabilities; and secondly, by opening up greater monetization opportunities for the Meta Model API.

The report points out that if Watermelon offers access to its cutting-edge model API at a significantly lower price than its competitors, it will be highly attractive to developers and enterprise clients, thereby driving a substantial increase in usage. JPMorgan Chase views the Meta Model API as a third monetization channel independent of advertising and Muse, and believes that the addition of cutting-edge models will substantially enhance the business potential of this service.

In terms of financial forecasts, JPMorgan Chase projects Meta's revenue to reach $254.3 billion, $305.3 billion, and $354.4 billion in 2026, 2027, and 2028, respectively, representing annual growth rates of 26.5%, 20.0%, and 16.1%. Adjusted earnings per share are expected to grow from $36.46 in 2026 to $46.07 in 2028. It is worth noting that due to large-scale capital expenditures, the bank expects the company's free cash flow to remain negative from 2026 to 2028, with capital expenditures as a percentage of revenue projected to rise to around 80% in 2027 and 2028.

Hardware ecosystem development is accelerating, with wearable devices connecting to the Muse portal.

At the Connect conference, Meta clearly shifted Reality Labs' strategic focus to wearable devices that serve Muse and personal super intelligence, positioning glasses as the biggest hardware opportunity, aiming to reach more than 2 billion glasses wearers worldwide.

At the product level, Meta launched the Ray-Ban Meta Audio, integrating headphone functionality and AI into a slim 43-gram frame, priced at $349, with shipping starting October 13th. The concurrently released Ray-Ban Meta (3rd generation) features improved battery life (9 hours vs. 8 hours), offers 27 color and lens combinations, and is priced at $449, now available for purchase. In addition, Meta launched eyewear designed by Kyle Jenner and co-branded with LISA, both starting at $399; the entry-level Meta Adventurer is priced at $249. Meta also announced the expansion of its eyewear sales to Singapore, South Korea, Mexico, and the UAE, and will soon enter the Brazilian market.

Meta also released the Muse Charm handheld device, equipped with an approximately 2-inch display and an onboard 5G module, allowing users to access their personal Muse avatar. It is expected to be available for sale before the end of the year. In the VR field, Meta released the Meta VR Glasses, weighing approximately 100 grams, about one-fifth the weight of the Meta Quest 3. It features a built-in Meta AI agent and is IMAX Enhanced certified, priced at $1299, and is expected to ship in Spring 2027.

Valuation restructuring, long-term TAM supports premium potential

JPMorgan raised its target price multiple from 23x to 26x, citing increased confidence in the visibility of Meta revenue growth, continued cost optimization capabilities, and the certainty of its AI monetization path. The report emphasizes that even using a 2028 GAAP EPS of $35.44 as a valuation benchmark, this forecast itself may be conservative.

Within a longer-term narrative, JPMorgan Chase believes Muse has the potential to become the largest consumer AI application in terms of user base since ChatGPT. The report cites Meta's statement at Connect, saying that Muse has already reached millions of users, and Meta's goal is to develop it into a super-intelligent platform for billions of users worldwide, with a potential market size potentially reaching trillions of dollars.

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