Meta Platforms, Inc. META is widely expected to have ended its “year of efficiency” with a flourish, with an analyst at KeyBanc Capital Markets largely upbeat about the fourth-quarter performance.
The Wall Street Analyst: Justin Patterson reiterated an Overweight rating on Meta shares and upped his price target by 22% from $380 to $465
KeyBanc’s updated price target is just shy of the Street-high number of Mizuho Securities at $470.
Evaluating Meta: “Meta ended the year with further momentum in its ad products, particularly Reels,” said Patterson. The analyst said the Reels short-video offering from Meta’s stable was now successfully competing with connected-TV for linear-TV budgets.
Q4 Estimates: When the Mark Zuckerberg-led company reports its quarterly results Thursday after the market close, KeyBanc expects revenue of $39.9 billion, marking 24% year-over-year growth and a 2% beat versus the consensus. The firm also left open the possibility of the company overshooting its estimates, given the strength in Reels, and Meta Advantage+. The latter is a grouping of the company’s automated ad products.
Patterson models earnings per share of $5.30, premised on much of the revenue upside seeping through to the bottom line due to his expectations that operating expenditure wouldn’t have substantially increased in the quarter. If the analyst’s expectation is met, Meta would beat consensus estimates by 8%.
Looking Ahead: For the first quarter, Patterson expects revenue of $32.8 billion to $35.2 billion. He sees the company giving a broad guidance range to reflect Oculus Quest 3 channel trends and potential regulatory changes.
The company will likely reaffirm annual operating expenditure and capex targets of $94 billion-$99 billion and $30 billion-$35 billion, respectively, the analyst said.
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Patterson also expects the Facebook Reality Labs losses to widen to $18.3 billion in 2024, up from an estimated $15.5 billion loss in 2023. The company will likely continue to see FRL as an investment area due to the recent optimism it relayed about its mixed-reality and wearable products.
Focus Areas On Earnings Call: Patterson listed the following as areas about which investors may want to get further clarity:
- AI ambitions for 2024 and beyond, especially on how AI can sustain revenue growth in the coming quarters
- Reels
- FRL division, mainly due to Apple, Inc.’s AAPL Vision Pro hitting the market and the Ray-Ban Meta product experiencing some success
- Efforts to boost Threads engagement
Citing a stronger ad market, early signs of Reels gaining ground against broader video budgets, inclusive of linear TV, and a slight improvements in forex compared to what was factored in while issuing the guidance, KeyBanc modestly raised its 2023, 2024 and 2025 revenue and earnings per share estimates for Meta.
In premarket trading on Tuesday, Meta shares rose 0.37% to $402.52, according to Benzinga Pro data.
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