Meta Platforms (NASDAQ: META), the parent company of Facebook, Instagram, and WhatsApp, will report its first-quarter earnings after the market closes today. Analysts expect the social media giant to deliver strong results, with revenue projected to reach $36.223 billion, a 26.5% year-over-year increase, and earnings per share to jump from $2.20 to $4.36.
This optimism is reflected in analyst ratings, with 51 experts recommending “Buy” for Meta, 7 recommending “Hold,” and only 2 suggesting “Sell.” The market clearly has high hopes for Meta, following its impressive 140% stock price growth in the past year after a challenging 2022.
However, with great power comes great responsibility. The social media giant now faces the pressure of exceeding expectations and not disappointing the markets and investors who believe in its bullish potential.
Analysts are sharply raising their forecasts for Meta Platforms, with InvestingPro’s chart showing a 59.8% increase in EPS expectations over the past year. This bullish sentiment has likely been fueled by Meta’s strong advertising revenue, which is driven by new ad formats across its platforms, and its advancements in AI with the launch of Meta AI, which promises to enhance user experiences on WhatsApp and Instagram.
While these strengths are promising, uncertainties remain. The company’s ambitious Metaverse project could lead to a second consecutive quarter of hefty losses exceeding $4 billion. Additionally, the upcoming US Presidential election poses a major challenge, potentially damaging Meta’s credibility as concerns rise about the spread of misinformation on social media platforms.
According to Thomas Monteiro, lead analyst at Investing.com, “Thanks to its leaner margins and substantial free cash flows, Meta’s ability to navigate the shifting interest rate narrative should be the key differentiator from its competitors this earnings season.” He also noted that the positive trend will likely get further push from the stronger-than-expected economic activity in the US and China for the period, which should serve as a solid catalyst for Meta’s thriving ad operation.
However, Monteiro acknowledged that risks still lurk for the company ahead of the earnings report. He said, “Concurrently, the risk for this report lies in the company’s need to show investors it is drawing closer to a scenario in which it will be able to draw substantial AI-generated revenues. Another interesting point is understanding whether a learner Metaverse operation can pay out in the mid-term. I would not be surprised by better-than-expected numbers there, but given the most recent US consumer trends, risks are still high.”
Overall, analysts are bullish on Meta Platforms, but uncertainties around the Metaverse monetization and the upcoming US Presidential election remain. Investors should carefully consider these factors before making any investment decisions.
