Meta stock is off to a hot start in 2024, with shares rising more than 15% this month after a 194% rally in 2023. But Mark Zuckerberg’s social media giant is due for its first big test of the year when Meta Platforms (META) reports earnings late Thursday.
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A strong fourth-quarter earnings report could help Team Zuckerberg build off its recently regained status as a trillion-dollar stock. Here is what analysts and investors are watching:
Meta Q4 Expectations: By The Numbers
Analysts project that Meta will post a 21.6% year-over-year sales increase to $39.1 billion for the fourth quarter, according to FactSet. The consensus for earnings in the quarter is $4.83 per share, a 175% year over year jump.
For the full year, analysts project Meta’s earnings will increase 67% to $14.40 a share, compared with a 37% drop in 2022.
As for current quarter guidance, analysts are forecasting $33.9 billion in sales from Meta for the March-ending period.
State Of The Advertising Market
While it has made bets on other lines of business such as virtual-reality headsets, Meta still derives almost all its revenue from selling advertising on its “Family of Apps,” which includes Facebook, Instagram, Reels, WhatsApp and Threads.
When the digital advertising market wobbled in 2022, Meta stock took a huge hit. Signs of recovery for advertising last year helped Meta bounce back.
Analysts with Jefferies expect that to continue in the fourth quarter of 2024. In a Jan. 28 client note, Brent Thill said check-ins with digital ad customers have been positive. Further, Meta has several tools that have allowed its sales to bounce back faster than other platforms.
“While many are seeing broad industry strength, META is notably outperforming given (return on investment) improvements coming from Advantage+ and other new AI ad tools,” Thill wrote. Jefferies has a buy rating for Meta with a 455 price target.
Advantage+ is an AI-powered advertising automation tool for businesses that Meta launched in 2022. As of September, Meta said the product has reached a $10 billion annual sales run rate.
Analysts will also be looking for updates on sales for advertisement on Reels. The short-video product is Meta’s competitor to TikTok. Zuckerberg told Meta stock analysts in October that Reels will be a “modest tail wind” for revenue this year after previously serving as a drag on sales.
Meta Stock: AI Push
Investors will be listening for updates on Meta’s AI efforts. Zuckerberg earlier this month touted the company’s AI ambitions in a post on Facebook. He said the company will acquire billions of dollars worth of Nvidia (NVDA) chips as part of an ambitious plan to build a “massive compute infrastructure” to support its AI offensive.
Analysts expect Meta can use AI for dual purposes. For advertisers, AI could help with launching and tracking campaigns. For users, AI tools such as chatbots could boost engagement and time spent on Facebook or Instagram. Meta launched its first group of chatbots late last year.
“We expect more visibility for Meta’s AI assets and capabilities in 2024, which should include new content for users (AI bots) and capabilities for corporations (including video campaigns built on Meta’s AI),” wrote BofA Securities analyst Justin Post in a recent client note. Post holds a buy rating for Meta stock with a 425 price target.
Year Two Of Efficiency?
Zuckerberg branded 2023 as a “Year of Efficiency” for Meta that included major cost cutting and layoffs. The push was a response to a rising chorus of concerns about the company’s spending as sales growth slowed in 2022.
That’s why Meta’s spending will likely be closely watched throughout the year. With its third-quarter earnings, Meta projected full-year expenses for 2024 to fall between $94 billion to $99 billion, according to its earnings release.
In a recent client note titled “Q4 Preview: Years of Efficiency,” Evercore ISI analyst Mark Mahaney said he expects the company to maintain its full-year expense and capital expenditure guidance. Mahaney holds a buy rating and 425 price target for Meta stock.
Meanwhile, the company’s losses on the metaverse are expected to grow. Analysts project that the metaverse focused Reality Labs division at Meta will post a $4 billion operating loss for the fourth quarter, against $733 million in revenue, according to FactSet.
Meta Stock Action
Heading into the report, Meta is extended significantly beyond a previous buy point of 326.20 from a cup base formed last year, according to IBD MarketSmith.
Last week, the company closed with a market capitalization above $1 trillion for the first time since 2021. On Monday, Meta stock closed with a price above 400 for the first time in its history.
Meanwhile, Meta Platforms is on the IBD 50 list of top growth stocks. It’s also on the leaders list of the IBD Leaderboard premium stock ideas service. IBD Stock Checkup shows Meta with a Relative Strength Rating of 96 as of Tuesday, indicating it has outperformed 97% of all stocks in the past 12 months.
Meta also boasts a highest-possible 99 IBD Composite Rating, which reflects strength across a number of technical and fundamental metrics linked to superior stock performance.
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