Oct 25, 2023

Facebook owner Meta Platforms will release third-quarter earnings on Wednesday after the market closes.

Meta-Daily-Chart

Meta: Daily Chart

Meta shares bounced from resistance at the all-time highs of $326, so this will be an important earnings release for the company. The first downside support comes in at $300–310.

Analysts are focusing on the company’s success in battling rival TikTok via its short-form video app Reels, as well as the current state of the digital advertising market after weakness in 2022.

Investors will also be looking for any post-earnings commentary on artificial intelligence, expectations for new headsets like the Quest 3 and Ray-Ban Meta smart glasses, and the company’s “year of efficiency” cost-savings goals.

UBS said its channel surveys “indicate that Reels is outperforming TikTok with lower CPMs and improved engagement,” saying that Instagram and Facebook’s share of US downloads is catching up to TikTok.

During Meta’s upcoming conference call, analysts will be looking for updates regarding long-term spending plans, especially after the company has committed large sums to the metaverse, which is showing no signs of adoption.

“We think the GenAI consumer app bull case is still under-appreciated and not priced into shares. We think more disclosure on GenAI product uptake and eventual monetization could bolster confidence in the durability of top-line growth, driving multiple expansions,” UBS said in a recent report.

Morningstar analysts are focused on costs, saying:

“We’d like the firm to discuss its latest plans for the metaverse and whether it will relaunch with its aggressive investments on that front. We think artificial intelligence is an important component of the metaverse,” analysts added.

Goldman Sachs has a $384 target for the firm and said:

“The stock is inexpensive on forward price-to-earnings multiples, and management has reset the cost base to align with a mixture of compounded earnings growth while also maintaining a robust investment cadence in long-term initiatives such as AI and the metaverse”.

Projections are mixed, with UBS having a target of $415 and JP Morgan at $325, with the latter adding:

“We like Meta and believe valuation remains compelling… For Q3 specifically, ad checks have been positive, both from a macro perspective and in terms of meta-specific initiatives like Advantage+, Reels, and Click-to-Message ads”.

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