Suncoast Equity Management argues that Meta Platforms, Inc. (NASDAQ: META) offers a compelling valuation opportunity, citing the rapid adoption of its new AI-enabled app, Muse, as evidence that the company's heavy artificial intelligence spending is beginning to yield tangible results. The SEC-registered investment advisory firm highlighted Meta as a leading contributor to its U.S. Equity Large Cap Select Growth Strategy in a Q3 2026 investor letter, suggesting that the stock's recent performance reflects a narrowing gap between earnings growth and market returns.
The strategy advanced 4.2% after fees in the third quarter. Since March, the Select Growth portfolio has risen 14.5% after fees. Suncoast noted that while the portfolio lagged the S&P 500 over the four quarters ending June 30, 2026, the divergence between portfolio earnings per share growth and total returns is closing. The firm stated that this trend suggests a promising investment opportunity, provided severe macroeconomic conditions do not materialize.
Meta Platforms closed at $721.31 per share on October 07, 2026, with a market capitalization of $1.84 trillion. The stock posted a year-to-date gain of 9.51% and traded within a 52-week range of $520.26 to $779.82. Over the last six months, META shares returned 14.6%, compared to an 18.2% gain for the S&P 500 ETF (SPY) and a 33.9% gain for the Insider Monkey Billionaire 30 Index.
In its letter, Suncoast addressed investor concerns regarding Meta's enormous AI capital expenditures and whether they will generate adequate returns. The firm described these concerns as legitimate but pointed to new monetization opportunities as a factor rapidly shifting sentiment. Muse, introduced in September, has been the most downloaded app on Apple and Android devices since its launch, with early user reviews described as favorable. Suncoast noted that AI has already improved Meta's advertising effectiveness and could create new revenue streams, potentially reframing current heavy spending as a savvy investment.
The letter emphasized that while it is too early to determine exactly how much Meta will monetize Muse, the stock's rapid snap-back during the quarter illustrates what can occur when share prices and fundamentals become overly disconnected. Suncoast highlighted that Meta remains a powerful global advertising platform with earnings expected to grow at a rate of 35% in 2026, yet the company trades at a price-to-earnings ratio below the market average.
Insider Monkey data indicates that 254 hedge fund portfolios held Meta Platforms at the end of the second quarter, a decrease from 262 in the previous quarter. Despite this slight reduction in institutional ownership, Meta remains the fifth most popular stock among hedge funds heading into 2026 according to Insider Monkey's database. Dan Niles previously suggested that Meta could further monetize its AI spending by launching a public cloud business to compete with Amazon, Microsoft, and Google.