Is Meta Share Price a buy after first quarter earnings?
Introduction:
META, the parent company of Facebook, Instagram, WhatsApp, and other popular platforms, recently released its earnings report for the first quarter of 2024. The report showed excellent results, with revenue and profit growth exceeding expectations. But the Meta stock price fell more than 12% in after hours trading on April 24th 20024 In this blog, we will take a closer look at why the Meta share price fell and why we think it is an opportunity to buy.
Revenue and Profit:
META’s revenue for the first quarter of 2024 was $36.46 billion, a 27% increase year-over-year which topped estimates of $36.33 billion. This growth was primarily driven by the growth of the company’s advertising business, which generated $35.64 billion in revenue. The average price per ad rose 6% in the quarter. Also, the company’s profit for the quarter more than doubled year-over-year to $4.71 versus expectations of $4.32. Big beats on expectations on revenue and profits for the quarter.
User Growth:
META’s user base continued to grow. The company’s daily active users (DAUs) increased by 7% year-over-year to 3.24 billion. This growth was driven by the continued popularity of Facebook, Instagram, and WhatsApp, as well as the growth of the company’s other platforms, such as Messenger and Reels.
Forward Guidance:
Meta raised its 2024 capital expenditure guidance to between $35 billion and $40 billion from the prior $30 billion to $37 billion range due to infrastructure investments required to support its artificial intelligence
strategy, Chief Financial Officer Susan Li said in a statement. The company also provided revenue guidance for the next quarter of between $36.5 and $39 billion which was lower than the average forecast of $38.5 billion.
Meta Share Price:
META’s share price has rallied hard in the past few months. The earnings report however has not gone down well so far with investors, the lower than expected revenue guidance and also the increased costs in AI investments have caused a selloff of 15%.
This has happened before when META (formerly Facebook) announced big capital expenditures in the Metaverse. The share price dropped from $300 to $100 over a period of months. However, the stock price soared again, rallying 400% when the CEO Mark Zuckerberg announced a reduction in spending on the Metaverse.
These scenarios could play out all over again. We don’t see another 400%, however our valuation models suggest a 20% or higher valuation for META’s share price. We will be adding META to our buy watchlist and wait to see where the share price bottoms in the coming days or weeks.
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Click Here to see a link to META’s earnings release.
Happy Investing
Stephen
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