- Social media giant blasts past Q1 forecasts
- Cost cuts and toned down Metaverse investment please
- Stock soars 11.5%, according to pre-market data
There’s been a lot of repairs going on behind the scenes at Meta Platforms (META:NASDAQ) as the Facebook, WhatsApp and Instagram-parent tries to become a leaner, meaner, social media machine.
No longer betting the house on the metaverse, embracing artificial intelligence for new revenue streams and, perhaps most importantly in the short-term, swinging the axe at its hefty costs, is bolstering financial performance and starting to rebuild investor confidence.
Meta reported first-quarter results that topped Wall Street expectations and the social media giant provided upbeat revenue guidance amid ongoing progress to bring down costs. After forecast-thumping quarterlies from Alphabet (GOOG:NASDAQ) and Microsoft (MSFT:NASDAQ), how investors loved it.
Meta jumped in after-hours trading as pre-market data shows the shares expected to open 11.5% higher at $233.51, their highest in more than a year.
FUNDSMITH BOSS PROVES THEM WRONG AGAIN
This is a holding that has had some investors starting to question the sanity of Terry Smith, founder and CEO of Fundsmith Equity (B41YBW7), one of the most popular funds owned by UK retail investors. Yet Smith has proved the doubters wrong, as he often does.
Meta is a key holding in the Fundsmith Equity portfolio. Its shares have soared 139% in six months while Fundsmith has returned 12.2% over the same timeframe, versus 4.6% from the Investment Association Global sector.
Take that, naysayers.
Signs of recovery in Meta’s advertising business are helping to dispel concerns about the continued relevance of its core social media platforms, pointed out Russ Mould, investment director at AJ Bell.
‘This, plus the greater efficiency pursued by the business in recent months, is clearly helping to win the market over, although CEO Mark Zuckerburg’s continued insistence on pursuing his metaverse vision will ring in the ears of some investors like tinnitus,’ he said.
NUMBERS BACK UP MOOD CHANGE
Meta announced earnings per share of $2.20 on revenue of $28.65 billion, compared to the $2.02 and $27.61 billion of analysts polled by Investing.com.
Advertising revenue rose to $28.1 billion year-on-year from $27 billion, good going given the advertising slowdown. Advertising impressions across the company’s apps jumped 26%, but average price per advert fell 17% year-on-year, pressured by increasing competition.
Headcount fell 1% to 77,114 year-on-year in Q1. ‘We have substantially completed the 2022 employee layoffs while continuing to assess facilities consolidation and data centre restructuring initiatives,’ the company said.
Meta sees brighter times ahead too, guiding for revenue in a range of $29.5 billion to $32 billion in Q2, above Wall Street estimates of $29.47 billion. Further down the line, Meta sees full year 2023 revenue in the range of $86 billion to $90 billion.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (Daniel Coatsworth) own shares in AJ Bell and units in Fundsmith Equity.
