Social media giant Meta Platforms META is set to release second-quarter fiscal 2024 results today after market close.
The stock has delivered flat returns over the past three months and has outperformed the industry’s decline of 5.8%. An upside might be in the cards if Meta Platforms beats estimates on earnings. It saw positive earnings revision activity, which is generally a precursor to an earnings beat (read: Should You Buy the Dip in "Mag 7" and Big Tech ETFs?).
This has put the focus on ETFs — Communication Services Select Sector SPDR Fund XLC, Fidelity MSCI Communication Services Index ETF FCOM, Vanguard Communication Services ETF VOX, iShares Global Comm Services ETF IXP and First Trust Dow Jones Internet Index Fund FDN — with a substantial allocation to this social media giant.
Earnings Whispers
Meta Platforms has an Earnings ESP of -1.45% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meta Platforms saw a positive earnings estimate revision of 3 cents over the past 30 days for the soon-to-be-reported quarter. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The current Zacks Consensus Estimate for the to-be-reported quarter indicates substantial year-over-year earnings growth of 45.2%. Revenues are expected to increase 19.6%. Meta Platforms delivered an earnings surprise of 13.3%, on average, in the last four quarters.
Meta Platforms currently has an average brokerage recommendation (ABR) of 1.33 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 45 brokerage firms. Of the 45 recommendations deriving the current ABR, 39 are Strong Buy and one is Buy. Strong Buy and Buy, respectively, account for 86.67% and 2.22% of all recommendations.
Based on short-term price targets offered by 40 analysts, the average price target for Meta Platforms comes to $542.73. The forecasts range from a low of $360.00 to a high of $630.00.
META has a top Growth and Momentum Score of A and belongs to a top-ranked Zacks Industry (top 22%). At current levels, Meta's stock trades at 23.02X forward earnings, a discount to the Zacks Internet-Software industry average of 31.34X.
What to Watch
Investors will be closely watching the signs of whether the AI investment by Meta has started to pay off returns, especially after Alphabet (GOOGL) and Microsoft (MSFT) failed to impress. Most analysts are positive about the strength of META’s advertising sales (read: Tesla, Google Spark Sell-Off in Technology ETFs).
Like its tech rivals, META is investing heavily in its AI future by rolling out open-source artificial intelligence. The company released its mostly free Llama 3.1 artificial intelligence model last week and said developers can use and modify its AI models free of charge. There has been a steady increase in AI-generated content on Facebook and Instagram, attracting advertisers and enhancing user engagement. The trend is expected to gather momentum going forward. Additionally, Meta is expected to get a lift from advertising surrounding this year’s election as well as the Olympics.
On the lastearnings conference call the world’s largest social media platform guided revenues in the range of $36.5-$39 billion for the second quarter. It raised its capital expenditure guidance to $35-$40 billion for this year from the earlier projection of $30-$37 billion and expects to increase it next year as well. The company expects 2024 total expenses to be in the range of $96-99 billion compared with the prior outlook of $94-99 billion due to higher infrastructure and legal costs.
ETFs in Focus
Communication Services Select Sector SPDR Fund (XLC) - Meta Platforms takes the top position at 21.1% share (see: all the Communication ETFs here).
Fidelity MSCI Communication Services Index ETF (FCOM) - Meta Platforms occupies the top position at 23.5%.
Vanguard Communication Services ETF (VOX) - Meta Platform takes the top spot with a 23.5% share.
iShares Global Comm Services ETF (IXP) - Meta Platforms is the top firm, accounting for 21% share.
First Trust Dow Jones Internet Index Fund (FDN) - Meta Platforms occupies the second position with 9.1% of the assets.
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Get it free >>First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
Vanguard Communication Services ETF (VOX): ETF Research Reports
Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports
iShares Global Comm Services ETF (IXP): ETF Research Reports
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
