Meta Platforms Inc. (NASDAQ:META) shares are moving lower Tuesday, despite positive analyst coverage. Here's what you need to know.

What To Know: Wolfe Research initiated coverage on Meta Tuesday with an Outperform rating and price target of $620, representing potential upside of about 24% from current share prices.

In a new note to clients, analyst Shweta Khajuria highlighted Meta's position as a leading social media platform, benefiting from scale, healthy top-line growth and a must-have ad platform for digital advertisers.

Khajuria noted that Meta could potentially benefit from ongoing AI-led product development, driving user engagement and ROI for advertisers.

The company is investing heavily in AI and the metaverse and could be positioning itself as a leader in these technologies long term, the analyst said, adding that revenue growth acceleration is expected due to AI investments in ad products, Reels, click-to-message and price optimizations.

"Our Outperform rating is based on our long-term view that the company's scale, AI investments, category leadership position, and product catalysts should enable META to outgrow the digital advertising market, gain scale, and generate new sources of revenue," Khajuria said.

Although the analyst noted that valuation is "reasonable" on a growth-adjusted basis, risks include a prolonged investment cycle without meaningful cost-cutting, lack of significant near-term growth drivers and limited room for multiple expansion given the recent rally. Meta shares are up approximately 38% year-to-date, per Benzinga Pro.

Meta is currently trading at about 22 times forward earnings, but Wolfe Research sees room for multiple expansion to 26 times earnings, Khajuria said.

META Price Action: Meta shares were down 1.25% at $489.92 at the time of writing, according to Benzinga Pro.

• Small Cap Stocks Are Having A Moment: Russell 2000 Notches Best 5-Day Rally In Over 4 Years

Image via Shutterstock.