Meta Platforms Shows Solid Q4 Results Amid Stock Challenges

A month has gone by since the last earnings report for Meta Platforms (META). During this period, its shares have declined approximately 4.2%, underperforming compared to the S&P 500. Investors are now left wondering if the current downward trend will persist ahead of the upcoming earnings release, or if the company is poised for a turnaround. To provide insight, let’s examine the most recent earnings report and key catalysts.

META’s Q4 Earnings and Revenue Exceed Expectations

In its fourth-quarter 2024 report, Meta Platforms announced earnings of $8.02 per share, surpassing the Zacks Consensus Estimate by 20.06% and marking a 50.5% year-over-year increase. Revenues reached $48.385 billion, exceeding expectations by 3.02% and reflecting a 20.6% growth year over year. When adjusted for constant currency (cc), revenues grew by 21% year over year.

Strong User Base Drives META’s Top-Line Growth

Most of META’s revenues (97.8%) come from its Family of Apps, including Facebook, Instagram, Messenger, and WhatsApp, which reported a 21.2% year-over-year increase, totaling $47.302 billion. The Family Daily Active People (DAP)—registered users accessing at least one Family product daily—was 3.35 billion, up 5% year over year. Regional revenue growth was particularly strong, with the United States & Canada, Asia-Pacific, Europe, and the Rest of World (RoW) up 17.2%, 23.1%, 21.8%, and 28%, respectively.

Advertising Revenues Surge Year Over Year

Meta’s advertising revenues, constituting 98.9% of Family of Apps revenues, increased by 20.9% year over year to $46.78 billion, accounting for 96.7% of total fourth-quarter revenues. In constant currency, advertising revenues also grew by 21% year over year. Each geographic region showed impressive year-over-year surges: 18% in the United States & Canada, 23.2% in Asia-Pacific, 21.8% in Europe, and 26.7% in RoW. Ad impressions delivered across the Family of Apps grew by 6%, and the average price per ad increased by 14% during the quarter. Additionally, other revenues from the Family of Apps climbed 55.4% year over year to $519 million, while Reality Labs’ revenues (2.2% of total) grew slightly by 1.1% to $1.08 billion.

META Expands Operating Margin Despite Rising Costs

In the fourth quarter, total costs and expenses rose by 5.4% year over year to $25.02 billion, making up 51.7% of revenues, a notable drop from 59.2% in the same quarter the previous year. Family of Apps expenses reached $19 billion, accounting for 76% of overall expenses, primarily due to infrastructure and headcount-related costs. Reality Labs expenses, meanwhile, were $6 billion, rising 6% year-over-year. Operating income surged to $23.37 billion, reflecting a 42.6% increase from a year ago, with an operating margin of 48.3%, up from 40.8% in the prior year. Nevertheless, Reality Labs reported a loss of $4.97 billion, a decline from last year’s loss of $4.65 billion.

META’s Financial Position Remains Robust

As of December 31, 2024, Meta’s cash and cash equivalents, along with marketable securities, totaled $77.82 billion, an increase from $70.90 billion at the end of September. Long-term debt was stable at $28.83 billion, up slightly from $28.82 billion. Capital expenditures jumped to $14.84 billion compared to $9.2 billion in the previous quarter, while free cash flow improved to $15.52 billion, up from $10.9 billion.

Positive Guidance from META

Looking forward, Meta Platforms anticipates total revenues for the first quarter of 2025 to fall between $39.5 billion and $41.8 billion, projecting an 8-15% year-over-year growth, or 11% at constant currency. For the full year 2025, META expects total expenses within a range of $114 billion to $119 billion, alongside projected capital expenditures between $60 billion and $65 billion.

Recent Estimate Trends

In the past month, however, new estimates have shown a downward trend.

VGM Scores Overview

Currently, Meta Platforms holds a strong Growth Score of A, but its Momentum Score lags with a D. Similarly, the stock received a D rating for value, placing it in the bottom 40% of this investment strategy. Cumulatively, Meta has a VGM Score of B, which investors seeking a well-rounded approach should consider.

Market Outlook

With downward trends in estimates, there is hope that revisions will improve. Meta Platforms currently holds a Zacks Rank #3 (Hold), indicating an expectation of an in-line return in the coming months.

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