Meta Stock: Facebook, Instagram Parent Hits Buy Point Ahead Of Q3 Earnings | Investor’s Business Daily
Meta’s Q4 earnings surge faded due to conservative guidance The social media titan not only exceeded expectations for both its revenue and profits. Meta (META) unveiled its Q3 earnings report on Wednesday, surpassing revenue and profit expectations. However, initial optimism waned after the company issued a cautious forecast for Q4.
During the earnings call, Meta’s CFO, Susan Li, attributed the softening demand to geopolitical unrest, both in the Middle East and on a global scale.
“It’s challenging to directly attribute the softness in demand to any specific geopolitical event,” Li told analysts. “Historically, we’ve observed a broader softening in demand following other regional conflicts, such as the Ukraine war. Thus, we are closely monitoring this situation. Our Q4 outlook incorporates the latest trends and advertiser reactions, reflecting the increased uncertainty and volatility ahead.”
Initially, the company’s stock price surged by as much as 4% in after-hours trading, but these gains dissipated following Meta’s announcement.
Meta has been navigating a challenging landscape, balancing its role as an AI-driven advertising powerhouse with a capital-intensive expansion into VR and AR. The parent company of Facebook and Instagram is focused on strengthening its AI initiatives and its position in the digital advertising market, which has experienced a prolonged slump with only recent signs of recovery.
Meta reported Q3 advertising revenue of $33.64 billion, surpassing the expected $32.94 billion. The company also exceeded estimates for ad impressions, showing a 31% year-over-year increase compared to the expected 29.6%.
Meta’s stock has gained over 130% year-to-date, vastly outperforming the S&P 500 and the Nasdaq Internet Index, which have seen gains of around 9% and 34%, respectively.
“The stock has performed well this year,” said Neuberger Bergman analyst Daniel Flax during an interview with Yahoo Finance Live on Wednesday. “If they can sustain growth and translate it into earnings per share and free cash flow, I believe the stock can continue its upward trajectory.”
However, Meta faces potential legal challenges in the near future as it confronts federal and state lawsuits from 42 attorneys general, who allege that features on Facebook and Instagram targeted at children are addictive.
“We’re disappointed that instead of collaborating constructively with companies in the industry to establish clear, age-appropriate standards for the many apps teenagers use, the attorneys general have chosen this path,” a Meta spokesperson stated.
Currently, Wall Street analysts’ recommendations for Meta include 60 Buy ratings, seven Hold ratings, and two Sell ratings.
Here are the key figures reported by Meta, compared to analysts’ estimates compiled by Bloomberg:
Revenue: Actual $34.15 billion, up 23% YoY, expected $33.52 billion
Earnings per share: Actual $4.39, up 168% YoY, expected $3.60
Facebook daily active users: Actual 2.09 billion, expected 2.07 billion
Reality Labs operating loss: Actual $3.74 billion, expected $3.94 billion
Q4 revenue outlook: Actual $36.5 billion-$40 billion, expected $38.76 billion
Mark Zuckerberg’s “Year of Efficiency” initiatives appear to be yielding results as the company lowers its 2023 capital expenditure outlook, revising it to a range between $27 billion and $29 billion, down from the previously announced $27 billion to $30 billion.
Meta’s Family of Apps business, including WhatsApp, generated over $33 billion in revenue. The division’s operating income for the quarter was $17.49 billion, surpassing analysts’ expectations of $15.23 billion.
However, Reality Labs, Meta’s mixed reality business, has been a point of concern. Since 2022, Meta has incurred losses exceeding $20 billion in running Reality Labs, with $13.7 billion of those losses occurring last year. The company anticipates that these losses will continue and increase significantly in 2023. Meta recently launched its Quest 3 headset, priced at $499.99.
Meta CEO Mark Zuckerberg expressed his satisfaction with the company’s performance, stating, “We had a good quarter for our community and business. I’m proud of the work our teams have done to advance AI and mixed reality with the launch of Quest 3, Ray-Ban Meta smart glasses, and our AI studio.”
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