6,294
edits
Meta Platforms:Quarterly Results/2023 Q3: Difference between revisions
Meta Platforms:Quarterly Results/2023 Q3 (view source)
Revision as of 12:16, 20 October 2023
, 20 October 2023→Analyst Opinions
| Line 152: | Line 152: | ||
==== User engagement ==== | ==== User engagement ==== | ||
* Jefferies expects Meta to report high engagement due to its AI advancements, saying that third-party data indicates '''total time spent on Instagram grew 37% year-over-year in September.''' | * Jefferies expects Meta to report high engagement due to its AI advancements, saying that third-party data indicates '''total time spent on Instagram grew 37% year-over-year in September.''' “We believe investors will react positively to commentary on deepening Reels engagement, improvements to measurement, strong Click to Messaging ad growth and the China advertiser tailwind,” Jefferies analysts wrote<ref name=":1" />. | ||
* According to a Morgan Stanley survey of 2,000 Americans, '''79% of Instagram users now use Reels, up from 74% in May, and 36% are using Reels daily, up from 34%. Similarly, 69% of Facebook users now use Reels, up from 65% in May, and 30% use Reels daily,''' '''up from 27%'''. Morgan Stanley analysts said the growth in Reels engagement could push earnings to $20 per share in 2024. They added that their conversations with advertisers point to an incremental ad scaling for Reels<ref>https://seekingalpha.com/news/4021250-metas-reels-morgan-stanley</ref>. | |||
* Citi analysts said '''Reels ad loads improved''' during the quarter<ref>https://www.investing.com/news/stock-market-news/citi-says-meta-shares-to-rally-in-near-term-on-share-gains-upcoming-ai-event-432SI-3180528</ref>. “With Reels ad loads reaching 19% QTD vs. 17% in 2Q per our proprietary tracking, coupled with newer ad units, greater advertiser demand, and what we believe is an improving online advertising environment, we believe Meta is taking share of the broader online advertising market.” “Our tracking suggests ad loads expanded to 18% in July, 19% in August, and ~20% in September and given our view that the leading SFV platform ad load is closer to mid-20%, we believe there remains upside as engagement grows and Reels’ Lo-Fi ad environment attracts more advertisers.” | |||
==== | ==== Q3 results and future outlook ==== | ||
* Jefferies thinks that if management reports revenue growth below 20% in the third-quarter or give guidance for fourth-quarter that doesn't reflect acceleration, investors would react negatively. | * Jefferies thinks that if management reports revenue growth below 20% in the third-quarter or give guidance for fourth-quarter that doesn't reflect acceleration, investors would react negatively. “Expectations are high with Street calling for Meta to grow revenue about 20% year-over-year in the third quarter which would be the fastest growth since 3Q 2021,” they wrote<ref name=":1" />. | ||
* Jefferies also thinks that if Meta give total expense guidance for 2024 that exceeds '''$100 billion''' (their projection), it may lead to a downside in the stock. “Given Meta's historical cadence of growing operating expenses at or below the initial guidance, investors would likely be positive on any guide below $100 billion," they wrote<ref name=":1" />. | |||
* Jefferies also thinks that | * Jefferies also thinks that capex guidance for 2024 that exceeds $35 billion could also cause a downside. “We model 21% growth to $35 billion in fiscal 2024 and would view guidance above our model as a potential negative for the stock.”<ref name=":1" /> | ||
* Aided by Reels, Click to Message and core ads business, Meta could generate earnings of up to $20 per share by 2024, Morgan Stanley said (Sep.7). Analyst Brian Nowak projects that Reels monetization could grow to 44% in 2024 from 28% at the moment. He said click to message accounts for about $12 billion of total ad revenue and growing by 36% year-over-year<ref name=":3">https://seekingalpha.com/news/4009924-meta-20-earnings-per-share-2024-morgan-stanley</ref>. | |||
* Wells Fargo projects modest revenue acceleration into Q4. It also expects Meta's total expenses in 2024 to be blelow $95 billion (Oct.10)<ref>https://www.wallstreetzen.com/news/wells-fargo-analyst-lowers-price-target-on-facebook-maintains-strong-buy-rating</ref>. | |||
* JP Morgan (Oct.4) increased their 2024 total expenses projection. "The biggest change in our model is increasing '''2024 total expenses to $97.5B''' (from $93.4B previously), and we expect Meta to guide to a range of $96B-$102B. Our 2024 capex remains $38B, and we expect Meta to guide to a range of at least $35B-$40B," they wrote.<ref name=":4">https://www.investing.com/news/stock-market-news/meta-platforms-price-target-cut-at-jpmorgan-but-analysts-remain-positive-432SI-3190322</ref> | |||
==== Potential new subcription model for EU users ==== | |||
* Bofa thinks €156/year (~$163) subscription option is a high price and expect most users to stick with the free version. They also expect the regulators to pushback on the proposal. However, the analysts said if the proposal go through, Meta will '''benefit''' since the paid version will monetize better<ref>https://seekingalpha.com/news/4018170-meta-reaffirms-with-buy-bofa-potential-ad-free-subscription-service-eu-users</ref>. | |||
==== AI Chatbots ==== | |||
* Truist is positive on Meta’s AI-powered experiences showed at Meta Connect 2023<ref>https://thefly.com/landingPageNews.php?id=3786587&headline=META-Truist-constructive-on-Meta-Platforms-sees-strong-growth-recovery-in-Q&utm_source=https://thefly.com/news.php%3Fsymbol=META&utm_medium=referral&utm_campaign=referral_traffic</ref>. | |||
* Barclays projects that AI tools , including chatbots could boost Meta’s core ad revenue by $16B but could also increase its cost of goods sold by at least $10B (Oct.5)<ref>https://seekingalpha.com/news/4018685-meta-ai-tipping-point-barclays</ref>. | |||
“This unique approach might actually resonate with the non-tech-savvy consumers that are on WhatsApp and Instagram every day, and help overcome the barrier that some of the previous AI agent services face in terms of utility,” Barclays said regarding Meta’s AI Agents. “We’d also note that using celebrities faces and fine-tuned expressions was a smart way humanize and differentiate the AI agents from the crowded field.” | |||
* UBS projects that chatbot could add more than $20 billion to Meta’s revenue (Aug.7)<ref>https://finance.yahoo.com/news/ubs-meta-platforms-seen-unveiling-100034715.html</ref>. | |||
==== Advertising business ==== | |||
* JP Morgan (Oct.4) expects Meta Platforms advertising business to continue to outperform, "with AI investments paying off and Reels approaching revenue neutral/accretive."<ref name=":4" /> | |||
* Morgan Stanley said excluding Reels and click to message, Meta’s other ad business is still “choppy” due in part to Apple’s privacy change, engagement trends and a host of other issues, but expects “more durable” core revenue growth in future as a result of more innovations(Sep.7)<ref name=":3" />. | |||
==== Valuation ==== | |||
* JP Morgan said (Oct.4) Meta's valuation is still compelling with shares trading at 15x their updated 2025E GAAP EPS of $20.29<ref name=":4" />. | |||
== Small Competitor Earnings Expectations and Results == | == Small Competitor Earnings Expectations and Results == | ||