Yahoo Finance Why Is Meta Platforms (META) Up 5.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Meta Platforms (META). Shares have added about 5.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Meta Platforms due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
META Q1 Earnings & Revenues Beat
Meta reported first-quarter 2024 earnings of $4.71 per share, beating the Zacks Consensus Estimate by 9.03%. The company reported earnings of $2.20 per share in the year-ago quarter.
Revenues of $36.46 billion beat the Zacks Consensus Estimate by 0.48% and jumped 27.3% year over year.
Meta’s top line has been benefiting from the growing integration of AI into its products. Currently, 30% of the posts on Facebook feed are delivered by its AI recommendation system. AI-recommended content now comprises more than 50% of the content people see on Instagram. Threads have more than 150 million monthly actives.
However, META shares fell 15.15% in after-hours trading following CEO Mark Zuckerberg’s comments on the company’s AI and metaverse initiatives and investments associated with them. Capital expenditure for 2024 is now expected between $35 billion and $40 billion, up from the previous expectation of $30-$37 billion.
Meta now expects to invest significantly more over the next few years in developing more advanced models and the largest AI services in the world. However, monetization of these AI services will take considerable time (“several years”), as per the Meta CEO.
Top-Line Details
Geographically, revenues from the United States & Canada, Asia-Pacific, Europe and the Rest of the World (RoW) surged 21.3%, 25.5%, 33.7% and 41.8% on a year-over-year basis, respectively.
Revenues from Family of Apps (98.8% of total revenues), which includes Facebook, Instagram, Messenger, WhatsApp and other services, increased 27.2% year over year to $36.02 billion.
Family Daily Active People or DAP, defined as a registered and logged-in user who visited at least one of the Family products (Facebook, Instagram, Messenger and/or WhatsApp) on a given day, were 3.24 billion, up 7.3% year over year.
Advertising revenues (99% of Family of Apps revenues) increased 26.8% year over year to $35.64 billion and accounted for 97.8% of first-quarter revenues. At cc, revenues increased 26%.
Advertising revenues from the United States & Canada, Asia-Pacific, Europe and the RoW surged 21.6%, 24.5%, 32.8% and 40% on a year-over-year basis, respectively.
Ad impressions delivered across Family of Apps increased 20% year over year, and the average price per ad increased 6% year over year in the reported quarter. Impression growth from Asia-Pacific, the RoW, the United States & Canada and Europe grew 28%, 17%, 16% and 12%, respectively.
Online commerce was the largest contributor to year-over-year growth, followed by gaming and entertainment and media.
Family of Apps’ other revenues soared 85.4% year over year to $380 million.
Reality Labs’ revenues (1.2% of total revenues) surged 29.8% year over year to $440 million.
Operating Details
In the first quarter, total costs and expenses increased 5.7% year over year to $22.64 billion. As a percentage of revenues, total costs and expenses were 62.1%, significantly down from 74.8% reported in the year-ago quarter.
In the reported quarter, Family of Apps expenses were $18.4 billion, accounting for 81% of Meta’s overall expenses. FoA expenses were up 7% year over year, primarily due to higher legal and infrastructure costs.
Reality Labs’ expenses were $4.3 billion, down 1% year over year.
As a percentage of revenues, marketing & sales expenses decreased 360 basis points (bps), while general & administrative expenses fell 60 bps on a year-over-year basis.
Research & development expenses, as a percentage of revenues, were 27.4%, down 540 bps on a year-over-year basis.
Meta’s employee base was 69,329 at the end of the first quarter, down 10% year over year but up 3% sequentially.
Operating income of $13.82 billion jumped 91.2% year over year. The operating margin was 37.9%, expanding significantly from 25.2% reported in the year-ago quarter.
Family of Apps’ operating income surged 57.4% year over year to $17.7 billion. Reality Labs reported a loss of $3.85 billion compared with the year-ago quarter’s loss of $3.99 billion.
Balance Sheet & Cash Flow
As of Mar 31, 2024, cash & cash equivalents and marketable securities were $58.12 billion compared with $65.4 billion as of Dec 31, 2023.
Long-term debt was $18.39 billion as of Mar 31, 2024, unchanged sequentially.
Capital expenditures were $6.72 billion in the first quarter compared with $7.9 billion in the previous quarter. Free cash flow was $12.53 billion compared with $11.51 billion reported in the previous quarter.
The company repurchased $14.64 billion of its Class A common stock in the reported quarter and paid a dividend worth $1.27 billion.
Guidance
Meta expects total revenues between $36.5 billion and $39 billion for the second quarter of 2024, assuming an unfavorable forex impact of 1% to year-over-year revenue growth.
For 2024, the company anticipates total expenses between $96 billion and $99 billion. It continues to expect Reality Labs’ operating losses to increase year over year in 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Meta Platforms has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Meta Platforms has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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