Meta Platforms (META) has already enjoyed year-to-date stock gains of almost 40%, besting the 4% rise in the S&P 500 index. Meanwhile, over the past year, the Facebook, Instagram and WhatsApp parent has surged 125%, crushing the 20% rise in the S&P 500 index.
The social media giant is set to report first quarter fiscal 2024 earnings results after the closing bell Wednesday. Its management has pushed all of the right buttons, including various cost optimization initiatives, many of which have enabled Meta to lower its 2023 expense guidance on two occasions this year. Given the stock’s strong outperformance relative to its peers, investors want to know how much better things can get.
Wall Street analysts, meanwhile, remain bullish on the company's potential for further monetization, particularly amid its various cost optimization initiatives, including the recently announced round of layoffs, which will contribute $30 billion in value to shareholders. Additionally, META has entered the generative AI competition with its newly unveiled Llama 3 language model and image generator. These initiatives not only puts the company in a much stronger financial standing in the near term, suggesting there is still value to be realized in the stock.
Citigroup analyst Ronald Josey recently reiterated his Buy rating on the stock and raised his target price to $590 from $525. “With Meta’s newer ad innovations (Adv.+ Creative, Reminder Ads, longer form Reels, etc.), a new AI video architecture, and greater overall advertiser adoption, we believe advertiser demand for Reels (and Meta) continues to improve,” Josey wrote in the note to investors.
As such, the company on Wednesday must continue to show gradual improvements in these areas for the quarter and full year.
For the three months that ended March, the Menlo Park, Calif.-based company is expected to earn $4.31 per share on revenue of $36.14 billion. This compares to the year-ago quarter when earnings were $2.20 per share on revenue of $28.64 billion. For the full year ending in December, earnings are projected to rise 35% year over year to $20.07 per share, while full-year revenue of $158.48 billion would rise 17.5% year over year.
The fact that full-year earnings are projected to rise north of 30% highlights the reasons why Wall Street analysts are so bullish on Meta stock. The strong earnings projection is the result of the aforementioned various cost cutting measures the company has undertaken to become leaner and more profitable. Meta has also flexed its growth muscles within its core digital advertising business, given that it boasts an estimated 3 billion monthly active users on its family of products.
These fundamental improvements were notable and important to the bottom line in Q4 when it earned an adjusted $5.33 per share on $40.11 billion in revenue, beating EPS by a whopping 39 cents, while revenue grew 25% year over year, topping estimated by roughly $940 million. Q4 daily active users across its family of products was 3.19 billion on average, an increase of 8% year-over-year, while monthly active numbers reached 3.98 billion, an increase of 6% year-over-year.
Just as important, Q4 ad impressions and price per ad impressions delivered across its Family of Apps grew by 21% year-over-year, while the average price per ad rose 2% year-over-year. Armed with tons of cash, thanks to efficiency improvements, the company also announced its first-ever dividend while boosting its stock buyback program by $50 billion. Given these key fundamental improvements, Meta stock will continue to outperform the market if the company on Wednesday can continue to assert its ad dominance while providing strong guidance for the quarter and full year.
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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