Meta stock continues rebound in 2023 as tech companies pivot further into A.I., VR

Yahoo Finance tech editor Dan Howley details how more tech companies like Meta are looking towards artificial intelligence and virtual reality as the next big trends in the industry.

Video transcript

JARED BLIKRE: Welcome back. More tech companies are embracing AI as the next big thing. Meta is up next. The stock showing glimmers of hope this year after falling 65% last year. Now the stock has rebounded. As of late, up 25% plus early in 2023. And the company now says AI tools are helping its business, according to the Wall Street Journal. Yahoo Finance's Dan Howley has the story. All right, what are we talking about here?

DAN HOWLEY: So, basically, Meta, Facebook, Instagram, WhatsApp, whatever you want to refer to it as, their year was awful, right? Apple basically cut their legs out from underneath them by introducing those privacy changes. I think as a consumer, you're happy that you're not being tracked all over the world, but you still are. They ended up introducing that, and then the ad market fell out. They're dumping all this money into the Metaverse, which God knows if that will ever pay off. I am very bearish on that, to say the least. Well, just look at 3D TVs. Nobody wants to wear 3D glasses on their faces.

But now they're starting to turn that around a little bit. It looks like, according to this report at least, they've kind of gone into the AI space the way that TikTok did, where the recommendation engine that TikTok has, that's the secret sauce that they have to make the app do what it does-- recommend different things to people, get them to keep scrolling and scrolling and scrolling. And so now they're adding that and using it in their Reels platform, which essentially is TikTok in Facebook, Instagram form. And it appears to be doing well for them. So that's helping them a lot.

They're also doing better on the ad side of things because after being hit by the Apple privacy changes-- I think it was about a year and a half ago, something along those lines-- they finally are getting around to being able to collect data on users not from third party sources, but from their own sources. So now it's that they're not as reliant. So what does that mean for the coming quarter? Well, according to Bloomberg's estimates, revenue expectations are for $31-- sorry, $31.6 billion.

Not great, though, because last year, they were at 33.6 billion in the quarter. Average adjusted EPS, we're expecting $3.01. That's down from $3.67 in the same quarter last year. So, sure, it looks like it's turning around right now, but it doesn't seem as though it's happening immediately.

DAVE BRIGGS: Well, the stock performance is a lot of what Andrew Slimmon just told us. It's really because they were so beaten down last year, why they're up, to Jared's point, more than 20% this year. But beyond the EPS and the numbers, what are your questions about that earnings report next week? What are you really waiting to see beyond those digits?

DAN HOWLEY: I think how much they're dumping into the Metaverse still. And they say that they're going to continue to pour billions of dollars into this. And it's not seeming to pay off. I mean, look, you can have a 200% increase in the sale of headsets. That's not going to happen, by the way. This is just an example. But if nobody has headsets, and you have a 200% increase, that doesn't say a lot, right?

I don't necessarily think that the way they're approaching it with headsets is going to be the way the Metaverse is. Sure, there will be something called the Metaverse. It'll be screens that are easier and more accessible, less like this, less like phones. Maybe they're thinner. They're more ubiquitous. But like I said, 3D TVs do not exist because people did not want to have to put glasses on when they're on their couch that they don't need. Now strap a giant headset to your face and sit on your couch, and tell me you enjoy that.

SEANA SMITH: It sounds like you're not going to be doing it anytime--

DAVE BRIGGS: I'll pass on that.

SEANA SMITH: --soon.

DAVE BRIGGS: I think-- look, I think investors are wondering, are we going to see massive cuts again? Are we going to see layoffs yet again? But we've asked that several quarters in a row. Can he keep slashing his way to a win? Dan Howley, thank you, sir. Appreciate that.