Benzinga - by Chris Katje, Benzinga Staff Writer.
Technology giant Meta Platforms Inc (NASDAQ: META) is among the most anticipated quarterly earnings reports of the week. The company reports third-quarter financial results after the market close Wednesday, Oct. 25.
Here’s a look at the estimates from analysts, what analysts are saying and key items for investors to watch.
Earnings Estimates: Analysts expect Meta Platforms to report third-quarter revenue of $33.56 billion, according to data from Benzinga Pro.
The company reported revenue of $27.71 billion in the third quarter of last year. Meta Platforms has beaten analyst estimates for revenue in four of the last five quarters, including the first two quarters of the current fiscal year.
Guidance from the company during its second-quarter results called for third-quarter revenue to be in a range of $32 billion to $34.5 billion.
Analysts expect Meta Platforms to report earnings per share of $3.63 for the third quarter, compared to $1.64 in the prior year’s period. The company has missed EPS estimates from analysts in three of the last five quarters but did beat estimates in the first two quarters of the current fiscal year.
Related Link: Meta And AI - Chief Product Officer Chris Cox Reveals Future Plans
What Analysts are Saying: Return on advertising spend (ROAS) is a key item for Meta Platforms according to Benchmark analyst Mark Zgutowicz.
The analyst, who had a Hold rating and no price target on Meta Platforms, said the company is a beneficiary of companies looking to spend on advertising.
“After losing significant digital ad share in ’22, META is tracking to take back meaningful share in ’23,” Zguotwicz said.
The analyst saw some compression coming in the near-term for ad spending on Facebook.
“Whether this is/isn’t a prelude to the eye of the consumer storm, we believe the data is a compelling forward indicator of META ad growth, and perhaps a strong indicator 4Q’s relative seasonal strength.”
Strong user engagement and accelerated advertising growth are highlighted as positives for Meta Platform heading into the third quarter by Seaport analyst Aaron Kessler.
The analyst, who initiated the stock with a Buy rating and $365 price target, saw Meta Platforms continuing its advertising recovery and having an “attractive” valuation.
“We believe Meta remains well positioned to remain the dominant global in the social advertising market (ex China),” Kessler said.
The analyst sees user growth trends solid for Meta Platforms and the Reels business growing with engagement.
“Further Meta is leveraging AI for recommended content which is also driving incremental engagement, particularly for Facebook Feed.”
Artificial intelligence is key for the future of Meta with more AI-driven products being rolled out, Kessler added.
Here’s a look at other recent analyst activity on Meta Platforms in the month of October:
Truist: Buy rating, $390 price target
JP Morgan: Overweight rating, lowered price target from $425 to $400
Wells Fargo: Overweight rating, lowered price target from $389 to $372
Key Items to Watch: There will be several major topics analysts and investors will be looking for during the third quarter financial results and conference call from Meta Platforms.
Among the biggest will be discussions on artificial intelligence. Meta could share what new AI-enabled products they launched in the quarter and what’s to come.
With companies such as Microsoft and Alphabet investing billions of dollars in artificial intelligence, Meta’s spending in the area could also be closely monitored.
The company called artificial intelligence one of the “most compelling opportunities” to invest and grow in.
User metrics will be another key to watch. Meta Platforms reported 3.07 billion family daily active people and 3.88 billion family monthly active people in the second quarter, which were up 7% and 6% year-over-year, respectively.
The company also saw daily active users and monthly active users on Facebook up 5% and 3% year-over-year respectively. Analysts and investors will be hoping to see more growth in the key metrics.
Advertising is a key market to watch, with the company seeing more ads delivered in the second quarter on a year-over-year basis, but the average price per ad down 16% year-over-year. A strong third quarter would see the number of ads delivered up and the average price improving from the second quarter.
The company could also share an update on its restructuring and capital expenditures as it has done in recent quarters.
With the Middle East conflict waging on and the upcoming 2024 election, the company could be asked to share details on how it can help spread misinformation on its social media platforms. The war between Hamas and Israel has been a big topic among social media platforms.
META Price Action: Meta Platforms shares traded at $310.90 on Tuesday versus a 52-week trading range of $88.09 to $330.54. Shares of the company are up over 150% year-to-date.
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