Meta reported impressive figures on both the top and bottom lines for the second quarter, providing a positive outlook for the current period. Investors were thrilled with the results, noting the improved ad targeting, augmented Reels monetization, and cost-saving measures as highlights of the report.
Meta shares skyrocketed more than 6% on Tuesday, reaching their highest level since January 2022 post the presentation of higher than anticipated outcomes for the second quarter as well as guidance for the current period that was beyond analysts' expectations. The company announced earnings per share of $2.98 which was higher than the $2.91 per share predicted by Refinitiv analysts. Revenue was noted to have increased 11% year over year, surpassing the Refinitiv surveyed average analyst estimate of $31.12 billion. The Facebook parent company's outlook for the third quarter was revenue of $32 billion to $34.5 billion, surpassing the anticipated $31.3 billion.
The success of the results can be attributed to an upturn in internet advertising along with signs that Meta CEO Mark Zuckerberg's "year of efficiency" focus on cutting costs and increasing profitability is bearing fruit. Goldman Sachs analyst Eric Sheridan, who maintains a buy rating on Meta's shares, commented that while there were some mixed narratives around expenses and capital expenditure for the next few years, management's "year of efficiency" is driving a sustained change in the company's attitude while investments in key objectives remain a priority.
Other analysts praised the display of strong engagement, rising monetization of Meta's rival for TikTok - Reels as well as return on investments in artificial intelligence, leaving Bank of America analyst Justin Post increasing his price target to $375 from $350 and reiterating his buy rating on the stock. Post expressed that Meta is gaining traction again with a renovated technology stack and Reels strategy. Despite this, analysts were left uncertain around Meta's investments in its own universe (metaverse) as shown by expanding losses in the company's Reality Labs unit with an operating loss of $3.7 billion in the second quarter. Additionally, Meta cautioned that operating losses in Reality Labs are anticipated to persist this year with an expected "significant increase" in 2024.
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