(US) Meta: An Opportunity or Wait & See?
By Vincent Lau, Head of Equity Research, Rakuten Trade.
Meta Platforms (META), the parent company of Facebook, recently made the headlines with its mixed bag of financial results. While their Q1FY24 earnings showcased impressive growth in revenue and profits, the stock took a nosedive in after-hours trading, leaving investors scratching their heads.
Here’s a breakdown for you on what’s happening with META:
The Good News
Its Q1FY24 earnings revealed some impressive numbers.
- Revenue soared by 27.26% compared to the previous year, reaching a whopping USD36.46 billion.
- Net profit doubled, reaching USD12.37 billion, thanks to a significant increase in revenue coupled with reduced sales and marketing costs.
- Adjusted earnings per share (EPS) came in at USD4.71, beating analysts' estimates.
The Concerns
Despite the strong financial performance, Meta's stock plummeted in after-hours trading. The primary reason? A tepid sales forecast for Q2FY24, which fell short of analysts' expectations. The company expects sales between USD36.5 billion to USD39 billion, below the anticipated USD38.3 billion.
Investors also seemed jittery about Meta's heavy investments in futuristic technologies like glasses and mixed reality, which are not yet profitable. CEO Mark Zuckerberg reiterated the company's commitment to these ventures, emphasizing the long-term benefits of investing in artificial intelligence (AI) technologies.
In conclusion, Meta's recent rollercoaster ride reflects the complexities of balancing short-term expectations with long-term growth strategies. While the stock price may be down today, savvy investors understand that success in the tech industry often requires patience and a forward-looking mindset.
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Vincent Lau, a licensed research analyst by the Securities Commission Malaysia, who spearheaded the formation of Rakuten Trade Sdn Bhd's digital research team for retail investors. Presently, he serves as the Head of Equity Sales, leading digital news-driven trading ideas. With nearly 20 years in corporate finance, Lau has held prominent roles at Kenanga Investment Bank, RHB Islamic Bank, Standard Chartered Bank, and Hong Leong Islamic Bank. Lau is a graduate of Flinders University, holding a Bachelor of Commerce, and the University of Malaya, where he earned an MBA.
