Meta Platforms META is scheduled to release its third-quarter 2024 earnings report on October 30.
Expected total revenues are between $38.5 billion and $41 billion for this period.
The Zacks Consensus Estimate projects third-quarter revenues at $40.16 billion, reflecting a year-over-year increase of 17.62% compared to last year.
Additionally, the earnings consensus is set at $5.17 per share, showing a slight increase over the past month and indicating a 17.77% growth from the previous year’s earnings.
Meta Platforms has exceeded the Zacks Consensus Estimate in all of the past four quarters, averaging a surprising 12.61% above expectations.
Meta Platforms, Inc. Price and EPS Surprise
Meta Platforms, Inc. price-eps-surprise | Meta Platforms, Inc. Quote
Explore the latest EPS estimates and surprises on Zacks Earnings Calendar.
Let’s review how things are shaping up for the upcoming earnings report.
Strong Advertising Growth Expected for META in Q3
META is benefiting from a robust advertising revenue stream. In the second quarter of 2024, advertising revenues surged by 21.7% year-over-year to $38.33 billion, comprising 97.9% of total revenue. When adjusted for currency changes, advertising revenue rose by 23% compared to the previous year.
The Zacks Consensus Estimate for advertising revenues in the third quarter of 2024 is set at $39.38 billion, up 17.04% year-over-year.
Meta’s platforms, including WhatsApp, Instagram, Messenger, and Facebook, collectively reach over three billion people daily, enhancing its appeal in the digital ad landscape alongside Alphabet’s GOOGL Google and YouTube.
META has been utilizing AI and machine learning to enhance the effectiveness of its services. Innovations in AI-driven recommendations have significantly improved user engagement.
However, rising costs associated with advanced AI model development may challenge profit margins. The Reality Labs segment continues to experience significant cash burn, which could affect META’s immediate financial outlook.
Year-to-date, META shares have risen by 60.4%, surpassing the Zacks Computer & Technology sector, which has a return of 25.3%, as well as the Zacks Internet Software Industry at 21.3%.
Meta Platforms has also outperformed several “Magnificent 7” competitors, including Apple AAPL, Alphabet, Amazon AMZN, Microsoft, and Tesla this year. Among these, NVIDIA stands out with a remarkable 183.6% gain.
To compare: Apple returned 19.8%, Alphabet 16.5%, Amazon 22.7%, Microsoft 13%, and Tesla only 4.9% over the same period.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
Currently, META shares are not considered undervalued, with a Value Score of C, indicating a potentially high valuation.
At a forward 12-month Price/Sales ratio of 7.96X, META exceeds the broader sector average of 6.14X and the industry average of 2.67X.
Price/Sales (P/S) Ratio
Image Source: Zacks Investment Research
META Leverages AI to Drive Growth
AI’s effectiveness relies on data, which META has in abundance due to over 3.2 billion daily users. The company is utilizing AI to enhance its platforms, resulting in improved personalized recommendations and boosted demand from advertisers.
Recent product launches, including the affordable Quest 3S headset and Orion Augmented Reality glasses, showcase META’s commitment to innovation. The Quest 3S offers the same features as its predecessor but at a lower price point, making it more competitive against Apple’s Vision Pro AR device.
New partnerships with services like Spotify and Amazon Music are expected to enrich the user experience with Ray-Ban Meta AR glasses.
Despite concerns regarding AI service monetization and regulatory challenges, META’s growth potential appears promising, bolstered by increasing service adoption and a Growth Score of B indicating strong opportunities for investors.
Conclusion
META’s advancements in AI are favorable for both short-term and long-term growth. While concerns regarding valuation and regulation persist, the strength of its service offerings makes Meta Platforms a compelling investment.
Currently, Meta Platforms holds a Zacks Rank #2 (Buy), suggesting that investors should consider adding this stock to their portfolios. A complete list of today’s Zacks #1 Rank (Strong Buy) stocks is available here.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
