After suffering the biggest losses among its FAANG peers in terms of market cap percentage in 2022, Meta Platforms (META) has come roaring back so far in 2023, posting a year to date gain of close to 80%, compared to 7% rise in the S&P 500 index.
Meanwhile, since bottoming out at around $88, Meta stock has gained more than 60% in the past six months, while the S&P 500 has gained just under 13%. Are there more gains ahead for the Facebook parent? The social media giant is set to report first quarter fiscal 2023 earnings results after the closing bell Wednesday. Wall Street has rewarded the company for its combination of cost-cutting efforts and the fundamental improvements CEO Mark Zuckerberg has made to right-size the business.
Amid a decline in the digital ad business at its core Facebook and Instagram products, the company has enacted various cost-cutting initiatives to boost profitability. Over two rounds of layoffs in November and March, the company has reduced its global headcount by roughly 21,000 jobs. Most-recently, the reductions have been in areas like user experience, software engineering, graphics programming, among other product-facing teams. Meanwhile, business-facing roles, such as finance, legal and HR are also being trimmed.
The latest round of cuts are expected to result in restructuring costs of between $3 billion and $5 billion. The market is optimistic that the company will emerge leaner and more profitable. There is also optimism that Meta can easily surpass its year-over-year revenue and profit comparisons as the global digital ad spending is expected to grow to roughly $422.8 billion this year, rising 7.2% year over year. The company on Wednesday must continue to show gradual improvements for the quarter and full year.
For the three months that ended March, the Menlo Park, Calif.-based company is expected to earn $2.03 per share on revenue of $27.62 billion. This compares to the year-ago quarter when earnings came to $2.72 per share on revenue of $27.91 billion. For the full year, ending in December, earnings are projected to rise 16% year over year to $9.97 per share, while full-year revenue of $122.14 billion would rise 4.7% year over year.
Aside from the prospect of easier year-over-year revenue and profit comparisons in the latter part of the year, the company stands to also benefit from potentially easing monetary policy. The latter is may help reverse the recent trend of declining revenue, which the company has suffered through three straight quarters. In that vein, analysts are projecting another quarterly revenue drop for the just-ended quarter.
However, it’s worth noting that if the company reaches the top end of the range of its revenue guidance between $26 billion and $28.5 billion, that dubious streak may end on Wednesday. In the fourth quarter, Meta earned an adjusted $1.76 per share on $32.17 billion in revenue, marking a year-over-year decline of 4.47%, though it surpassed Street estimates by $475 million. Q4 revenue included $31.44 billion from its family of apps, which includes Facebook, Instagram and WhatsApp.
During the quarter, Facebook ended with 2.96 billion monthly active users and 2 billion daily active users. In total, it ended the period with 3.74B monthly active users for its family of apps and 2.96B daily active users. The company also unveiled a $40 billion share buyback program, with Zuckerberg calling 2023 the "Year of Efficiency" and the company is "focused on becoming a stronger and more nimble organization.”
For the stock to remain on the upswing, the market on Wednesday will want to see continued improvements in top and bottom lines, with strong revenue guidance in the bread-and-butter digital ad business.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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