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Meta Platforms (META) Up 18.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Meta Platforms (META - Free Report) . Shares have added about 18.4% 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 drivers.
Meta Platforms Q3 Earnings Beat, Revenues Up Y/Y
Meta Platforms reported third-quarter 2023 earnings of $4.39 per share, beating the Zacks Consensus Estimate by 21.27%. The company had reported earnings of $1.64 per share in the year-ago quarter.
Revenues of $34.15 billion beat the Zacks Consensus Estimate by 2.07% and jumped 23.2% year over year. At constant currency (cc), the top line improved 21%.
Geographically, the Rest of the World (RoW) revenues grew 37.1% on a year-over-year basis. Asia-Pacific and the United States & Canada revenues increased 19.8% and 34.2% year over year, respectively. Performance in Europe improved, with revenues growing 16.5% year over year.
Revenues from Family of Apps (99.4% of total revenues), which includes Facebook, Instagram, Messenger, WhatsApp and other services, increased 23.7% year over year to $31.72 billion.
Top-Line Details
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 3.14 billion, up 7.2% year over year.
Family Monthly Active People or MAP increased 6.7% year over year to 3.96 billion.
Advertising revenues (99.1% of Family of Apps revenues) increased 23.5% year over year to $33.64 billion and accounted for 98.5% of third-quarter revenues. At cc, revenues increased 21%.
RoW advertising revenues jumped 35.8% on a year-over-year basis. Asia-Pacific and the United States & Canada advertising revenues increased 19.5% and 17.2% year over year, respectively. Moreover, Europe’s advertising revenues surged 35.3% year over year.
Ad impressions delivered across Family of Apps increased 31% year over year, and the average price per ad decreased 6% year over year in the reported quarter. Impression growth was primarily driven by Asia-Pacific and the Rest of the World.
Online commerce was the largest contributor to year-over-year growth, followed by CPG and gaming. Online commerce and Gaming benefited from strong spending by advertisers in China.
Family of Apps’ other revenues soared 52.6% year over year to $293 million.
Reality Labs’ revenues (0.6% of total revenues) plunged 26.3% year over year to $210 million.
Facebook’s User Base Remains Strong
Monthly active users (MAUs) were 3.049 billion, up 3.1% year over year.
MAUs in Asia-Pacific, RoW and the United States & Canada grew 3.4%, 4.3% and 1.9% year over year, respectively. Europe MAUs were flat year over year.
Daily Active Users (DAUs) were 2.085 billion, which increased 5.1% year over year and represented 68% of MAUs.
Asia-Pacific DAUs increased 6.4% year over year. DAUs in RoW and the United States & Canada grew 6% and 3%, respectively. DAUs in Europe increased 1.3% year over year.
Average Revenues per User in RoW jumped 31.5% on a year-over-year basis. Asia-Pacific, Europe, and the United States & Canada increased 15.8%, 14.2%, and 33.8%, year over year, respectively.
Robust Portfolio Aids Growth
Reels have been a major growth driver for Instagram. The company stated that Reels has driven more than 40% increase in time spent on Instagram since launch and is now net neutral to overall company ad revenues. It remains focused on growing Reels as part of its overall portfolio of video services, which make up more than half of time spent on Facebook and Instagram.
AI-driven feed recommendations have been a key catalyst. Meta has witnessed a 7% increase in time spent on Facebook and a 6% increase on Instagram as a result of recommendation improvements.
AI tools for advertisers are also driving growth, with Advantage+ Shopping Campaigns reaching a $10 billion run rate. More than half of the company’s advertisers are using Advantage+ Creative tools to optimize images and text in their ads.
Business messaging is a domain where Meta is expanding through WhatsApp. Thanks to the availability of WhatsApp business, Click-to-Message ads in India doubled year over year in the third quarter of 2023.
Regarding Threads, the competitor of X (previously Twitter), has close to 100 million monthly active currently.
Moreover, the launch of Quest 3, which Meta describes as its most powerful headset and the first mainstream mixed-reality device, is expected to provide a boost to its metaverse ambitions.
The company also launched the next generation of Ray-Ban Meta smart glasses in the reported quarter.
Operating Details
In the third quarter, total costs and expenses decreased 7.5% year over year to $20.398 billion. This included restructuring charges of $380 million.
As a percentage of revenues, total costs and expenses were 59.7%, significantly down from 79.6% reported in the year-ago quarter.
In the reported quarter, Family of Apps expenses were $16.4 billion, accounting for 81% of Meta’s overall expenses. FoA expenses fell 9% year over year. Reality Labs’ expenses were $4 billion, flat year over year.
As a percentage of revenues, marketing & sales expenses decreased 520 basis points (bps), while general & administrative expenses fell 610 bps on a year-over-year basis.
Research & development expenses, as a percentage of revenues, were 27.1%, down 600 bps on a year-over-year basis.
Meta’s employee base was 66,185 at the end of the third quarter, down 24% year over year.
Operating income of $13.75 billion jumped 142.7% year over year. The operating margin was 40.3%, expanding significantly from 20.4% reported in the year-ago quarter.
Family of Apps’ operating income surged 87.3% year over year to $17.49 billion. Reality Labs reported a loss of $3.74 billion compared with the year-ago quarter’s loss of $3.67 billion.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash & cash equivalents and marketable securities were $61.12 billion compared with $53.45 billion as of Jun 30, 2023.
Long-term debt was $18.38 billion as of Sep 30, unchanged sequentially.
Capital expenditures were $6.76 billion in the third quarter compared with $6.35 billion in the previous quarter. Free cash flow was $13.64 billion compared with $10.96 billion reported in the previous quarter.
The company repurchased $3.7 billion of its Class A common stock in the reported quarter. As of Sep 30, 2023, it had $37.22 billion available and authorized for repurchases.
Guidance
Meta expects total revenues between $36.5 billion and $40 billion for the fourth quarter of 2023. Favorable forex is expected to aid year-over-year top-line growth by roughly 2%.
For 2023, the company anticipates total expenses between $87 billion and $89 billion, including an estimated $3.5 billion in restructuring charges. Capital expenditure is expected between $27 billion and $29 billion.
It continues to expect Reality Labs operating losses to increase year over year in 2023.
For 2024, Meta expects total expenses between $94 billion and $99 billion, driven by higher infrastructure costs, depreciation expenses and operating costs. Higher compensation expenses due to more higher-cost technical roles will further add to the total expense growth.
Reality Labs’ operating expenses are expected to increase meaningfully on a year-over-year basis due to Meta’s ongoing product development efforts in augmented reality & virtual reality and investments to scale its ecosystem further.
For 2024, capital expenditure is expected between $30 billion and $35 billion, driven by investments in servers, including both non-artificial intelligence (AI) and AI hardware and data centers.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Meta Platforms has a strong 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Meta Platforms has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Meta Platforms belongs to the Zacks Internet - Software industry. Another stock from the same industry, F5 Networks (FFIV - Free Report) , has gained 10.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
F5 reported revenues of $706.97 million in the last reported quarter, representing a year-over-year change of +1%. EPS of $3.50 for the same period compares with $2.62 a year ago.
For the current quarter, F5 is expected to post earnings of $3.03 per share, indicating a change of +22.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for F5. Also, the stock has a VGM Score of C.
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Meta Platforms (META) Up 18.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Meta Platforms (META - Free Report) . Shares have added about 18.4% 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 drivers.
Meta Platforms Q3 Earnings Beat, Revenues Up Y/Y
Meta Platforms reported third-quarter 2023 earnings of $4.39 per share, beating the Zacks Consensus Estimate by 21.27%. The company had reported earnings of $1.64 per share in the year-ago quarter.
Revenues of $34.15 billion beat the Zacks Consensus Estimate by 2.07% and jumped 23.2% year over year. At constant currency (cc), the top line improved 21%.
Geographically, the Rest of the World (RoW) revenues grew 37.1% on a year-over-year basis. Asia-Pacific and the United States & Canada revenues increased 19.8% and 34.2% year over year, respectively. Performance in Europe improved, with revenues growing 16.5% year over year.
Revenues from Family of Apps (99.4% of total revenues), which includes Facebook, Instagram, Messenger, WhatsApp and other services, increased 23.7% year over year to $31.72 billion.
Top-Line Details
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 3.14 billion, up 7.2% year over year.
Family Monthly Active People or MAP increased 6.7% year over year to 3.96 billion.
Advertising revenues (99.1% of Family of Apps revenues) increased 23.5% year over year to $33.64 billion and accounted for 98.5% of third-quarter revenues. At cc, revenues increased 21%.
RoW advertising revenues jumped 35.8% on a year-over-year basis. Asia-Pacific and the United States & Canada advertising revenues increased 19.5% and 17.2% year over year, respectively. Moreover, Europe’s advertising revenues surged 35.3% year over year.
Ad impressions delivered across Family of Apps increased 31% year over year, and the average price per ad decreased 6% year over year in the reported quarter. Impression growth was primarily driven by Asia-Pacific and the Rest of the World.
Online commerce was the largest contributor to year-over-year growth, followed by CPG and gaming. Online commerce and Gaming benefited from strong spending by advertisers in China.
Family of Apps’ other revenues soared 52.6% year over year to $293 million.
Reality Labs’ revenues (0.6% of total revenues) plunged 26.3% year over year to $210 million.
Facebook’s User Base Remains Strong
Monthly active users (MAUs) were 3.049 billion, up 3.1% year over year.
MAUs in Asia-Pacific, RoW and the United States & Canada grew 3.4%, 4.3% and 1.9% year over year, respectively. Europe MAUs were flat year over year.
Daily Active Users (DAUs) were 2.085 billion, which increased 5.1% year over year and represented 68% of MAUs.
Asia-Pacific DAUs increased 6.4% year over year. DAUs in RoW and the United States & Canada grew 6% and 3%, respectively. DAUs in Europe increased 1.3% year over year.
Average Revenues per User in RoW jumped 31.5% on a year-over-year basis. Asia-Pacific, Europe, and the United States & Canada increased 15.8%, 14.2%, and 33.8%, year over year, respectively.
Robust Portfolio Aids Growth
Reels have been a major growth driver for Instagram. The company stated that Reels has driven more than 40% increase in time spent on Instagram since launch and is now net neutral to overall company ad revenues. It remains focused on growing Reels as part of its overall portfolio of video services, which make up more than half of time spent on Facebook and Instagram.
AI-driven feed recommendations have been a key catalyst. Meta has witnessed a 7% increase in time spent on Facebook and a 6% increase on Instagram as a result of recommendation improvements.
AI tools for advertisers are also driving growth, with Advantage+ Shopping Campaigns reaching a $10 billion run rate. More than half of the company’s advertisers are using Advantage+ Creative tools to optimize images and text in their ads.
Business messaging is a domain where Meta is expanding through WhatsApp. Thanks to the availability of WhatsApp business, Click-to-Message ads in India doubled year over year in the third quarter of 2023.
Regarding Threads, the competitor of X (previously Twitter), has close to 100 million monthly active currently.
Moreover, the launch of Quest 3, which Meta describes as its most powerful headset and the first mainstream mixed-reality device, is expected to provide a boost to its metaverse ambitions.
The company also launched the next generation of Ray-Ban Meta smart glasses in the reported quarter.
Operating Details
In the third quarter, total costs and expenses decreased 7.5% year over year to $20.398 billion. This included restructuring charges of $380 million.
As a percentage of revenues, total costs and expenses were 59.7%, significantly down from 79.6% reported in the year-ago quarter.
In the reported quarter, Family of Apps expenses were $16.4 billion, accounting for 81% of Meta’s overall expenses. FoA expenses fell 9% year over year. Reality Labs’ expenses were $4 billion, flat year over year.
As a percentage of revenues, marketing & sales expenses decreased 520 basis points (bps), while general & administrative expenses fell 610 bps on a year-over-year basis.
Research & development expenses, as a percentage of revenues, were 27.1%, down 600 bps on a year-over-year basis.
Meta’s employee base was 66,185 at the end of the third quarter, down 24% year over year.
Operating income of $13.75 billion jumped 142.7% year over year. The operating margin was 40.3%, expanding significantly from 20.4% reported in the year-ago quarter.
Family of Apps’ operating income surged 87.3% year over year to $17.49 billion. Reality Labs reported a loss of $3.74 billion compared with the year-ago quarter’s loss of $3.67 billion.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash & cash equivalents and marketable securities were $61.12 billion compared with $53.45 billion as of Jun 30, 2023.
Long-term debt was $18.38 billion as of Sep 30, unchanged sequentially.
Capital expenditures were $6.76 billion in the third quarter compared with $6.35 billion in the previous quarter. Free cash flow was $13.64 billion compared with $10.96 billion reported in the previous quarter.
The company repurchased $3.7 billion of its Class A common stock in the reported quarter. As of Sep 30, 2023, it had $37.22 billion available and authorized for repurchases.
Guidance
Meta expects total revenues between $36.5 billion and $40 billion for the fourth quarter of 2023. Favorable forex is expected to aid year-over-year top-line growth by roughly 2%.
For 2023, the company anticipates total expenses between $87 billion and $89 billion, including an estimated $3.5 billion in restructuring charges. Capital expenditure is expected between $27 billion and $29 billion.
It continues to expect Reality Labs operating losses to increase year over year in 2023.
For 2024, Meta expects total expenses between $94 billion and $99 billion, driven by higher infrastructure costs, depreciation expenses and operating costs. Higher compensation expenses due to more higher-cost technical roles will further add to the total expense growth.
Reality Labs’ operating expenses are expected to increase meaningfully on a year-over-year basis due to Meta’s ongoing product development efforts in augmented reality & virtual reality and investments to scale its ecosystem further.
For 2024, capital expenditure is expected between $30 billion and $35 billion, driven by investments in servers, including both non-artificial intelligence (AI) and AI hardware and data centers.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Meta Platforms has a strong 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Meta Platforms has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Meta Platforms belongs to the Zacks Internet - Software industry. Another stock from the same industry, F5 Networks (FFIV - Free Report) , has gained 10.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
F5 reported revenues of $706.97 million in the last reported quarter, representing a year-over-year change of +1%. EPS of $3.50 for the same period compares with $2.62 a year ago.
For the current quarter, F5 is expected to post earnings of $3.03 per share, indicating a change of +22.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for F5. Also, the stock has a VGM Score of C.