Is Meta Platforms Stock Worth Buying Ahead of Q3 Earnings?
Chicago, IL – October 28, 2024 – Zacks.com has published its latest insights in the Analyst Blog. Each day, Zacks Equity Research analysts discuss noteworthy news and trends affecting stocks and the broader financial market. Stocks that have recently been highlighted in this blog include Meta Platforms (META), Alphabet (GOOGL), and Apple (AAPL).
Key Takeaways from Monday’s Analyst Blog
Upcoming Q3 Earnings: Will Meta Platforms Shine?
Meta Platforms is preparing to announce its third-quarter 2024 results on October 30.
The company anticipates total revenues between $38.5 billion and $41 billion for the quarter. The Zacks Consensus Estimate for third-quarter revenues stands at $40.16 billion, which reflects a 17.62% increase compared to the same quarter last year.
Earnings estimates also show promise, with the consensus mark at $5.17 per share, a slight rise over the last month and indicative of a 17.77% growth from the previous year.
Impressively, Meta has surpassed the Zacks Consensus Estimate in each of the last four quarters, boasting an average earnings surprise of 12.61%.
Explore Current EPS Estimates and Surprises with Zacks Earnings Calendar
Let us delve into the factors influencing this eagerly awaited announcement.
Robust Advertising Revenue to Drive META’s Q3 Performance
META’s financial outlook is bolstered by strong advertising revenue growth expectations. In Q2 2024, advertising revenue rose 21.7% year over year to $38.33 billion, making up 97.9% of total revenues. When adjusted for currency, ad revenue saw a growth of 23% year over year.
The Zacks Consensus Estimate for advertising revenue in Q3 2024 is projected at $39.38 billion, reflecting a 17.04% increase from last year.
Meta’s platforms—WhatsApp, Instagram, Messenger, and Facebook—reach over three billion users daily. This extensive audience creates significant advertising potential, reinforced by a 10% increase in ad impressions year over year in Q2 2024.
Meta is effectively utilizing AI and machine learning to enhance user engagement across its platforms. Innovative AI-driven feed recommendations have proven essential in keeping users active.
Nevertheless, increasing costs from investments in advanced models and AI technology are likely to pressure margins. Additionally, the Reality Labs division continues to incur losses, which raises concerns for META’s short-term outlook.
META Stocks Outperforming Sector and Peers
META shares have surged 60.4% year to date (YTD), significantly outpacing the Zacks Computer & Technology sector’s 25.3% gain and the Zacks Internet Software Industry’s 21.3% increase.
Meta has also outperformed much of its “Magnificent 7” competition, including Apple, Alphabet, Amazon, Microsoft, and Tesla. Only NVIDIA has seen a better performance, with its YTD share price climbing by 183.6%.
Harnessing AI for Growth at META
AI is fundamentally data-driven, and META possesses a wealth of data harvested from its daily active user base of over 3.2 billion. The company is utilizing AI to enhance its platform offerings, specifically focusing on improving user experiences.
The broadened appeal among younger audiences and improved recommendations are strengthening Meta’s market position and appealing to advertisers, leading to anticipated revenue growth.
Recent product launches, such as the more affordable Quest 3S headset and Orion Augmented Reality glasses, complement new AI features, enhancing the capabilities of devices like Ray-Ban Meta glasses. This shift aims to compete more effectively with Apple’s Vision Pro.
Collaborations with Spotify, Amazon Music, Audible, and iHeart are set to enrich the user experience for Ray-Ban Meta AR glass customers.
Despite challenges regarding AI service monetization and ongoing regulatory scrutiny, META’s growth trajectory remains promising, as indicated by a Growth Score of B, suggesting considerable potential for investors.
Conclusion
META’s strategic incorporation of AI indicates positive prospects for both the near and long term. Although concerns about valuation and regulation persist, the strength of Meta Platforms’ services presents a compelling investment opportunity.
As of now, Meta Platforms holds a Zacks Rank #2 (Buy), implying investors should consider adding this stock to their portfolio. For a complete list of today’s Zacks #1 Rank (Strong Buy) stocks, click here.
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