Meta Bulls Bet Stock Will Break Out After Year of Head Fakes

(Bloomberg) -- Meta Platforms Inc. shares have been on a rollercoaster ride through 2026, rising and falling as investor belief in the Facebook parent's status as a player in the artificial intelligence space ebbs and flows.

But after the company settled lawsuits surrounding its social-media practices and unveiled its Muse AI agent that's designed to automate everyday tasks for ordinary people, bulls are betting the stock could be primed for a sustained breakout.

"Eliminating a legal overhang and then having a positive product in a hot narrative is certainly enough to get the early stages of a trend change going," said Dan Russo, co-chief investment officer at Potomac Fund Management, which owns Meta shares. "We've seen a number of these counter-trend rallies fizzle out and fade. What's key from here is to build on the momentum and validate the changing trend."

Meta shares have risen 22% off an August low and are on track for their biggest monthly gain since May 2025 this month. The rebound is not unlike others Meta has seen this year, with the stock experiencing four different trough-to-peak gains of at least 20%. Each of those rallies were short-lived, however, and saw shares hit lower peaks on each subsequent rally.

As a result, shares are essentially flat so far this year and well behind the 15% gain by the Nasdaq 100 Index. For Russo, in order for Meta's most recent ascent to be considered durable, the shares need to see a "sustained break above $700." The stock rose 2.7% on Monday to $665.60.

For bulls, Meta's $18 billion settlement of its social-media lawsuit removed a key overhang for the stock as a loss at trial could have resulted in penalties of as much as $1.4 trillion, according to its own calculation. Shares have fallen in just four of the 12 sessions since the deal was announced on Aug. 26.

Morgan Stanley's Brian Nowak likens the setup for Meta shares to the one Alphabet Inc. investors saw in late-2025, when the Google parent received a favorable ruling in a longstanding antitrust case and followed that up with a slew of new AI products. Alphabet shares have soared more than 50% since the antitrust ruling, making them the best-performing Magnificent Seven stock over that span.