Don’t be fooled by after-hours stock price movements. Meta Platforms had a very strong third quarter, with revenue guidance for the quarter also exceeding expectations. Revenue for the three months ended Sept. 30 rose nearly 19% from a year earlier to $40.59 billion, beating expectations of $40.29 billion, according to analyst estimates compiled by LSEG. . Third-quarter earnings per share rose more than 37% to $6.03, beating LSEG’s consensus EPS estimate of $4.25. Meta Year-to-date Mountain Meta Platform Year-to-date Meta stock price fell 3% following the release and commentary. Investors sold on lower-than-expected daily active user numbers in the quarter and rose on full-year capital spending outlook. Conclusion Yes, the much-anticipated Family Daily Active People (DAP) metric for the third quarter was a little short, but it was still up nearly 5% year-over-year to 3.29 billion. The Street was seeking 3.31 billion. Not a big deal, this is still over 40% of the world’s population. The Family of Apps segment includes Facebook, Instagram, Threads, Messenger, and WhatsApp. Oh, and on top of our user base growth, average revenue per person (ARPP) across our app family increased over 12% year-over-year to $12.29, slightly better than expected. Management has raised the lower end of its full-year capital expenditure guidance by $1 billion. However, the company also reduced its full-year total cost outlook by $1 billion. Funding directed towards artificial intelligence infrastructure is expected to increase in 2025, and we believe this is the right move given that Meta is already seeing returns on its investments to date, and has We are confident that we can proceed without jeopardizing our efficiency gains. Okay, now that we’ve got the “bad” stuff out of the way, let’s take a look at what investors should actually focus on when considering what to do with Meta stocks. To that end, we are raising our price target from $560 to $650 per share. This represents an increase of more than 9.5% from Wednesday’s closing price and is just a few dollars below its all-time high closing price of $595.94 on October 4th. However, we maintain our stock rating at 2 as we look for short-term gains. -takers gives you a better chance to upgrade your name. Meta Platform Why we own Meta Platform: We value Meta Platform for its targeted advertising advantages. Deep user engagement also creates a flywheel effect between users and content creators/marketplace sellers. The company’s scale provides the financial strength and employee talent necessary to secure new growth avenues such as artificial intelligence, the Metaverse, and virtual and augmented reality projects. We like management’s focus on cost control. Competitors: Alphabet, TikTok (owned by China’s ByteDance), Snap Portfolio weight: 4.53% Latest purchase date: September 6, 2022 Start date: May 29, 2014 Commentary So, higher-than-expected revenue, Let’s dig into the positives from the third quarter, including costs. In addition to lower-than-expected operating margins, which expanded significantly versus expected contractions, Family of Apps’ operating profit beat consensus and Reality Labs’ loss was smaller than expected. While moving in the right direction, Reality Labs lost $4.4 billion in the third quarter. The division, which houses Meta’s virtual and augmented reality headsets and its Metaverse efforts, has posted operating losses of more than $58 billion since its inception in 2020. Quest’s headsets lead this category, and its connected Ray-Ban glasses are also a big hit. CEO Mark Zuckerberg surprised developers by demonstrating a prototype AR glasses called Orion at the Meta Connect 2024 event in late September. There were video testimonials from some of the biggest names in the technology world, including Nvidia CEO Jensen Huang, who praised the device. Operating cash flow was nearly $2.5 billion more than the Street had expected, and capital expenditures were more than $1.8 billion less than expected. As a result, we generated free cash flow of $3.5 billion, which was higher than expected. Note that there was a timing advantage here, so some of the capital spending was pushed into the fourth quarter, increasing free cash flow. Nevertheless, operating cash flow was clearly impressive. Building on the strong third-quarter performance, management’s current (fourth-quarter) earnings guidance was above expectations at the midpoint. In terms of shareholder returns, the company repurchased $8.86 billion worth of shares and paid an additional $1.26 billion in dividends. In his post-earnings conference call, Zuckerberg called for strong growth for WhatsApp, saying the U.S. is one of the platform’s fastest-growing countries, reaching the milestone of just 2 billion calls per day. He pointed out that they had just broken through. As for Threads, Meta’s answer to X (formerly Twitter), the platform has more than 1 million new signups per day and about 275 million monthly active users. Zuckerberg also said, “Our AI efforts are also making significant progress, with AI touching nearly every aspect of our work, from core business engagement and monetization to our long-term business.” We can see that it is having a positive impact.” Roadmap for new services and computing platforms. ” Notably, Meta AI, the company’s version of a ChatGPT-type generative artificial intelligence search/answer engine, currently has more than 500 million monthly active users. Commenting on Meta’s work on Llama, the large-scale language model underlying Meta AI, Zuckerberg said, “As Llama becomes widely adopted and becomes an industry standard, its improvements in quality and efficiency will be reflected in all of our products. It will happen,” he said. He added that the team is “working with businesses to make it easier to use, and now working with the public sector to adopt Llama across the U.S. government.” He also added that the Rama 4 model is “currently very advanced in development.” Regarding social media platforms, Zuckerberg said, “AI-driven improved feed and video recommendations have increased time spent on Facebook by 8% and time spent on Instagram has increased by 6%. 1 million users this year alone. More than one advertiser used our service.” With Gen AI tools creating over 15 million ads last month and an estimated 7% increase in conversions for businesses using image generation, we believe there are even bigger benefits. ” Global advertising data shows that ad impressions, the number of times an ad was shown on an app, increased by 7% year-over-year, and the average price per ad increased by 11% year-over-year. Guidance Looking more closely at the guidance, Meta expects fourth-quarter 2024 revenue to be in the range of $45 billion to $48 billion, according to LSEG, at the midpoint of $46.5 billion, compared to what the Street expected. That’s more than the previous $46.31 billion. . However, management has also raised its full-year capital spending outlook, now expecting it to be in the range of $38 billion to $40 billion. This amount was on the lower end of the previous range of $37 billion to $40 billion. The midpoint of $39 billion is slightly higher than the street estimate of $38.25 billion. Looking ahead to 2025, the team said in a release: “We still expect capital spending to increase significantly in 2025. Given this, we expect infrastructure spending growth to accelerate significantly in 2024 as capital spending in 2024 is focused on the back end. Next year, we expect to see increased depreciation and operating expenses for our expanded infrastructure. ”Aside from profit-taking, this comment may be the reason for the stock taking a hit, considering the stock is up nearly 70% since the beginning of the year. That said, TheStreet had already modeled around a 24% increase in capex in 2025 before its release, so it’s not a huge surprise, sellers were wrong, and long-term investors’ patience will be rewarded. That’s what I think. “At Meta, it’s time to plan next year’s budget, which is still a work in progress, but I wanted to share a few things that stood out to me from our work so far,” Zuckerberg said on the conference call. Ta. First, it is clear that there are many new opportunities to leverage new AI advances to accelerate our core business with high ROI in the coming years. So I think we should invest more there. And secondly, our AI investments continue to require significant infrastructure, and while we haven’t determined the final budget yet, these are some of the directions I see. ” Note that this bodes well for the club’s name, Nvidia, given the quarterly earnings release late in the season. Despite forecasting an increase in capital spending, the team lowered the high end of its full-year total expense outlook, lowering the target range from $96 billion to $99 billion to $96 billion to $98 billion. This is slightly lower than the mid-point consensus estimate of $97.22 billion. (Jim Cramer’s charitable trust is long META, NVDA. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, trade before Jim makes trades. Receive alerts. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
At the Meta Connect developer conference, Mark Zuckerberg, head of the Facebook group Meta, showed off a prototype of computer glasses that can display digital objects in transparent lenses.
Andrei Sokolov | Picture Alliance | Getty Images
Don’t be fooled by after-hours stock price movements. Meta Platforms had a very strong third quarter, with revenue guidance for the quarter also exceeding expectations.
