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Meta Platforms Crushes Earnings and Continues its Campaign Higher
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Mark Zuckerberg and his social media empire Meta Platforms (META - Free Report) reported earnings Wednesday after the market closed and did not disappoint investors.
Meta Platforms beat earnings estimates by 3.2%, reporting EPS of $2.98 vs $2.89 expected, showing a 21% YoY increase. Sales grew 11% YoY to $32 billion and beat estimates of $31 billion.
META also saw impressive growth across its apps and in advertising, which boosted its forward guidance above analysts' expectations. Across all of Meta’s apps, daily active users reached 3.07 billion users, an increase of 7% YoY and monthly active users were 3.88 billion, a 6% YoY increase. Facebook DAUs grew 5% YoY to 2.06 billion and MAUs were 3.03 billion, a 3% YoY increase.
Advertising data couldn’t have been better. Ad impressions delivered across the Family of Apps increased by 34% YoY and the average price per ad decreased by 16% YoY.
Considering this incredibly strong report, along with Meta Platforms very successful restructuring, I think the stock is still quite appealing. Even after the 150% YTD run, META still has a valuation below its historical average, and continues to receive upward trending earnings revisions, indicating potential for more upside.
Image Source: Zacks Investment Research
Continued Strong Earnings Revisions
Meta Platforms has been near the top of the Zacks Rank for most of 2023. Earnings revisions higher started late last year and have continued higher through to today. Currently META boasts a Zacks Rank #2 (Buy) rating, demonstrating upward trending earnings revisions.
Earnings and growth over the next two years are projected to be very exciting. Next quarter earnings are projected to climb 82% YoY to $2.99 per share, and sales are forecast to grow 13.1% during the same period. FY23 earnings are expected to grow 22.3% YoY to $12.02 per share, while sales for the year are expected to increase 9.4% to $127.6 billion.
Image Source: Zacks Investment Research
New Lines of Business
Something that has really impressed me about Meta Platforms is CEO Zuckerberg’s ability to pivot and make huge decisions on very quick notice. Last year Meta began pouring billions into its Metaverse, an extension of their Oculus business. However, the project didn’t quite catch on the way they had hoped. Instead of doubling down, Zuckerberg showed restraint, and pulled back spending.
That doesn’t mean the Metaverse is dead either, just that META was maybe a bit early. Also impressive was his willingness to downsize the company, while simultaneously dealing with the metaverse debacle. META’s restructuring has really improved profitability and the business is realigned with the shareholders and market.
Another exciting business avenue is Meta Platforms is its venture into Generative AI. Its proprietary large language model Llama 2 has been open sourced, and Meta has partnered with Microsoft (MSFT - Free Report) to further enable development on the platform. Microsoft has of course been the company leading the AI revolution through its subsidiary OpenAI. Microsoft is the majority investor in OpenAI who invented the ChatGPT application, which has exploded in popularity.
AI capabilities are expected to be introduced on to Meta’s platforms to improve video sharing, business messaging, and visuals creation among other things.
And lastly, Meta rolled out one of the fastest growing consumer apps of all time this quarter, Threads. Threads is an X.com (FKA Twitter) competitor and rapidly grew to 100 million users. Although it looks like user engagement has dropped quickly after release, it is an impressive feat nonetheless to launch a completely new platform in such a quick time.
Valuation
META is still trading at an attractive valuation. At 24.8x one year forward earnings it is just above the market average of 21.6x, and well below its 10-year median of 28.8x. Considering EPS are expected to grow nearly 23% annually over the next 3-5 years, Meta Platforms remains an extremely compelling investment.
Image Source: Zacks Investment Research
Bottom Line
Meta Platforms, although often caught in deep swings of sentiment, is one of the world’s premium Mega cap technology companies. Its products reach nearly half the global population on a daily basis and continue to grow at a robust pace. Not only that, but the company now gushes cash, which allows for tremendous flexibility in considering how to reinvest or return the cash to shareholders.
Mark Zuckerberg is not yet 40 years old, pushing the limits of the company he founded, and seems interested in continuing to do so for years to come.
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Meta Platforms Crushes Earnings and Continues its Campaign Higher
Mark Zuckerberg and his social media empire Meta Platforms (META - Free Report) reported earnings Wednesday after the market closed and did not disappoint investors.
Meta Platforms beat earnings estimates by 3.2%, reporting EPS of $2.98 vs $2.89 expected, showing a 21% YoY increase. Sales grew 11% YoY to $32 billion and beat estimates of $31 billion.
META also saw impressive growth across its apps and in advertising, which boosted its forward guidance above analysts' expectations. Across all of Meta’s apps, daily active users reached 3.07 billion users, an increase of 7% YoY and monthly active users were 3.88 billion, a 6% YoY increase. Facebook DAUs grew 5% YoY to 2.06 billion and MAUs were 3.03 billion, a 3% YoY increase.
Advertising data couldn’t have been better. Ad impressions delivered across the Family of Apps increased by 34% YoY and the average price per ad decreased by 16% YoY.
Considering this incredibly strong report, along with Meta Platforms very successful restructuring, I think the stock is still quite appealing. Even after the 150% YTD run, META still has a valuation below its historical average, and continues to receive upward trending earnings revisions, indicating potential for more upside.
Image Source: Zacks Investment Research
Continued Strong Earnings Revisions
Meta Platforms has been near the top of the Zacks Rank for most of 2023. Earnings revisions higher started late last year and have continued higher through to today. Currently META boasts a Zacks Rank #2 (Buy) rating, demonstrating upward trending earnings revisions.
Earnings and growth over the next two years are projected to be very exciting. Next quarter earnings are projected to climb 82% YoY to $2.99 per share, and sales are forecast to grow 13.1% during the same period. FY23 earnings are expected to grow 22.3% YoY to $12.02 per share, while sales for the year are expected to increase 9.4% to $127.6 billion.
Image Source: Zacks Investment Research
New Lines of Business
Something that has really impressed me about Meta Platforms is CEO Zuckerberg’s ability to pivot and make huge decisions on very quick notice. Last year Meta began pouring billions into its Metaverse, an extension of their Oculus business. However, the project didn’t quite catch on the way they had hoped. Instead of doubling down, Zuckerberg showed restraint, and pulled back spending.
That doesn’t mean the Metaverse is dead either, just that META was maybe a bit early. Also impressive was his willingness to downsize the company, while simultaneously dealing with the metaverse debacle. META’s restructuring has really improved profitability and the business is realigned with the shareholders and market.
Another exciting business avenue is Meta Platforms is its venture into Generative AI. Its proprietary large language model Llama 2 has been open sourced, and Meta has partnered with Microsoft (MSFT - Free Report) to further enable development on the platform. Microsoft has of course been the company leading the AI revolution through its subsidiary OpenAI. Microsoft is the majority investor in OpenAI who invented the ChatGPT application, which has exploded in popularity.
AI capabilities are expected to be introduced on to Meta’s platforms to improve video sharing, business messaging, and visuals creation among other things.
And lastly, Meta rolled out one of the fastest growing consumer apps of all time this quarter, Threads. Threads is an X.com (FKA Twitter) competitor and rapidly grew to 100 million users. Although it looks like user engagement has dropped quickly after release, it is an impressive feat nonetheless to launch a completely new platform in such a quick time.
Valuation
META is still trading at an attractive valuation. At 24.8x one year forward earnings it is just above the market average of 21.6x, and well below its 10-year median of 28.8x. Considering EPS are expected to grow nearly 23% annually over the next 3-5 years, Meta Platforms remains an extremely compelling investment.
Image Source: Zacks Investment Research
Bottom Line
Meta Platforms, although often caught in deep swings of sentiment, is one of the world’s premium Mega cap technology companies. Its products reach nearly half the global population on a daily basis and continue to grow at a robust pace. Not only that, but the company now gushes cash, which allows for tremendous flexibility in considering how to reinvest or return the cash to shareholders.
Mark Zuckerberg is not yet 40 years old, pushing the limits of the company he founded, and seems interested in continuing to do so for years to come.