Investors ought to prepare for a robust Thursday with the imminent quarterly earnings from Meta Platforms (META), Apple (AAPL), and Amazon (AMZN). Marked by substantial fluctuations, Meta’s performance in 2023 stands out as a tale of resurgence following a dismal 2022.
The Roller Coaster Ride of Meta Stock
2023 proved to be a turning point for Meta stock, recuperating from a catastrophic 2022 with an impressive 194% annual return, marking its best performance in history. However, this resurgence was preceded by a tumultuous 2022, where shares underwent a severe downturn, losing about two-thirds of their value amidst a wider technology industry decline.
CEO Mark Zuckerberg’s declaration of 2023 as the “year of efficiency” accompanied a YoY revenue decline for the company’s first year as a public entity. The markets responded positively to Meta’s aggressive cost reduction measures, propelling the stock to outperform its FAANG counterparts by a substantial margin. The company also secured the position of the second-best performing S&P 500 Index stock for 2023, trailing solely behind Nvidia, the first trillion-dollar chip designer that capitalized on the artificial intelligence (AI) wave.
Analysts’ Expectations for Q4 Earnings
Analysts anticipate Meta to reveal Q4 revenues of $39.17 billion, signifying a 21.8% increase from the previous year. This anticipated growth is underpinned by the company’s aggressive cost-cutting measures, expected to result in a 61.3% rise in earnings per share.
The expanded guidance range issued by Meta’s CFO Susan Li, citing “more volatility” during Q4, is expected to be elaborated upon during the earnings release. This wider range was potentially influenced by the commencement of the Israel-Hamas conflict.
Bullish Sentiment and the Next Phase of Meta’s Growth
Wall Street analysts have exhibited a bullish outlook for Meta stock leading up to the Q4 report, with over 90% holding a “Strong Buy” or “Buy” rating. The recent resurgence of Meta shares, reclaiming a position in the $1 trillion club, has positioned the stock marginally above its mean target price.
The rally in Meta stock during the previous year was fueled by a combination of cost reductions and an expansion of its valuation multiples. While historically trading at a discount to its tech peers, Meta currently maintains the position of the second highest-rated FAANG stock behind Amazon.
Prospects for Sustained Growth
Cost cuts played a significant role in the resurgence of Meta stock in 2023. However, to further bolster its rally, Meta may require additional groundbreaking initiatives akin to the 2023 cost reductions. Given the significant impact of AI, Zuckerberg’s silence on terming 2024 as the “year of AI” in the Q3 earnings call suggests a potential emphasis on this area to drive future growth for Meta.
While the metaverse holds promise for the company’s long-term growth, its current state is a drain on profitability. Meta’s plans to engender confidence among investors in the aftermath of the remarkable 2023 progress, achieved within the “year of efficiency,” will be closely observed during the Q4 earnings call.
