Yahoo Finance Meta Platforms (META) Up 5.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Meta Platforms (META). Shares have added about 5.9% 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 Platforms Q1 Earnings Beat, Revenues Rise Y/Y
Meta Platforms reported first-quarter 2023 earnings of $2.20 per share, beating the Zacks Consensus Estimate by 34.69%.
Revenues of $28.65 billion beat the Zacks Consensus Estimate by 4.21% and increased 2.6% year over year. At constant currency (cc), the top line improved 6%.
Top-Line Details
Geographically, the Rest of the World (RoW) revenues grew 10% on a year-over-year basis. The Asia-Pacific and the United States & Canada revenues increased 3.5% and 3% year over year, respectively. However, Europe revenues declined 2.2% year over year.
Revenues from Family of Apps (98.8% of total revenues), which includes Facebook, Instagram, Messenger, WhatsApp and other services, increased 4% year over year to $28.31 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 3.02 billion, up 5.2% year over year.
Family Monthly Active People or MAP increased 4.2% year over year to 3.74 billion.
Advertising revenues (99.3% of Family of Apps revenues) increased 4.1% year over year to $28.10 billion and accounted for 98.1% of first-quarter revenues.
RoW advertising revenues grew 9.5% on a year-over-year basis. The Asia-Pacific and the United States & Canada advertising revenues increased 4.1% and 5.7% year over year, respectively. However, Europe advertising revenues declined 1.5% year over year.
Ad impressions delivered across Family of Apps increased 26% year over year and the average price per ad decreased 17% year over year in the reported quarter.
Family of Apps’ other revenues decreased 4.7% year over year to $205 million.
Reality Labs’ revenues (1.2% of the total revenues) plunged 51.2% year over year to $339 million.
Facebook’s User Base Remains Strong
Monthly active users (MAUs) were 2.99 billion, up 1.8% year over year.
MAUs in the Asia-Pacific, RoW and the United States & Canada grew 3%, 2.1% and 2.3% year over year, respectively. Europe MAUs declined 1.7% year over year.
Daily Active Users (DAUs) were 2.04 billion, which increased 3.9% year over year and represented 67% of MAUs.
The Asia-Pacific DAUs were up 5.6% year over year. DAUs in RoW and the United States & Canada grew 4.5% and 2%, respectively. DAUs in Europe were unchanged year over year.
Average Revenues per User in RoW grew 6.7% on a year-over-year basis. The Asia-Pacific, Europe, and the United States & Canada increased 1.1%, 1%, and 1.2%, year over year, respectively.
Operating Details
In the first quarter, total costs and expenses increased 10.5% year over year to $21.42 billion. As a percentage of revenues, total costs and expenses were 74.8%, significantly up from the year-ago quarter’s 69.5%.
In the reported quarter, Family of Apps expenses were $20.8 billion, accounting for 81% of Meta’s overall expenses. FoA expenses grew 23% year over year.
Reality Labs’ expenses were $5 billion, up 20%, driven by employee-related costs and technology development expenses.
As a percentage of revenues, while marketing and sales expenses decreased 120 basis points (bps), general and administrative expenses increased 160 bps on a year-over-year basis.
Research and development expenses, as a percentage of revenues, were 32.7%, significantly up from 27.6% reported in the year-ago quarter.
Meta’s employee base was 86,482 at the end of the first quarter, up 20% year over year.
Operating income of $7.23 billion decreased 15.2% year over year. The operating margin was 25.2%, down 530 bps on a year-over-year basis.
Family of Apps’ operating income declined 2.3% year over year to $11.22 billion. Reality Labs reported a loss of $3.99 billion compared with the year-ago quarter’s loss of $2.96 billion.
Balance Sheet & Cash Flow
As of Mar 31, 2023, cash and cash equivalents, and marketable securities were $37.44 billion compared with $40.74 billion as of Dec 31, 2022.
Long-term debt was $9.92 billion as of Mar 31, 2023.
Capital expenditure was $7.09 billion in the first quarter compared with $9.22 billion in the previous quarter. Free cash flow was $6.91 billion compared with the $5.29 billion reported in the previous quarter.
Meta repurchased $9.22 billion of its Class A common stock in the reported quarter. As of Mar 31, 2023, the company had $41.73 billion available and authorized for repurchases.
Guidance
Meta expects total revenues between $29.5 billion and $32 billion for the second quarter of 2023. Unfavorable forex is expected to hurt year-over-year top-line growth by less than 1%.
For 2023, the company anticipates total expenses for the current year between $86 billion and $90 billion, including $3-$5 billion of restructuring charges.
It expects Reality Labs operating losses to increase year over year in 2023.
In the ongoing year, Meta expects capital expenditure between $30 billion and $33 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 20.61% due to these changes.
VGM Scores
Currently, Meta Platforms has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Meta Platforms is part of the Zacks Internet - Software industry. Over the past month, F5 Networks (FFIV), a stock from the same industry, has gained 9.8%. The company reported its results for the quarter ended March 2023 more than a month ago.
F5 reported revenues of $703.18 million in the last reported quarter, representing a year-over-year change of +10.9%. EPS of $2.53 for the same period compares with $2.13 a year ago.
F5 is expected to post earnings of $2.86 per share for the current quarter, representing a year-over-year change of +11.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.1%.
F5 has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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