Meta Platforms Inc. Faces Mixed Reactions After Strong Q3 Earnings Report
Meta Platforms Inc. (NASDAQ: META) has had an impressive year so far. The tech giant has seen its shares climb by 550% since October 2022, and there are many reasons for investors to feel optimistic as we approach the new year.
However, despite a strong showing in its Q3 earnings report released on Wednesday, Meta’s shares fell by over 4% during Thursday’s trading. Based in Menlo Park, California, Meta remains a leading player in the tech industry.
With ongoing developments in artificial intelligence and next-generation technology, Meta distinguishes itself from competitors, a trend reflected in its share price for the past two years. Given this week’s decline after the earnings announcement, what should investors consider as they look ahead? Let’s explore two trading strategies emerging from this situation.
Examining Meta’s Financial Performance
First, let’s analyze key highlights from this week’s earnings report. Meta exceeded analyst expectations for both earnings per share (EPS) and revenue, which rose by over 19% year-on-year. CEO Mark Zuckerberg stated, “We had a good quarter driven by AI progress across our apps and business. We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses.”
Additionally, daily active users on Meta’s platforms grew by 5%, reaching nearly 3.3 billion, surpassing estimates. Though ad impressions fell short of predictions, the average price per ad exceeded expectations.
Analysts Weigh In: A Healthy Buying Opportunity?
For investors keen on strong fundamentals, Meta’s earnings report offered several positive signals, further supported by favorable analyst updates.
Yesterday’s dip can be seen as an attractive buying opportunity, particularly since many analysts updated their ratings to “Buy” following the report. Firms such as Citigroup, JMP Securities, UBS Group, and Susquehanna have set price targets as high as $719. Given that Meta shares closed at $568 on Thursday, this represents a potential upside of approximately 30%.
Weighing Possible Risks
Despite the positive aspects, cautious investors should consider some concerns, particularly regarding the overall tech environment. For example, Amazon.com Inc. (NASDAQ: AMZN) reported an 81% increase in capital expenditures, coupled with Meta’s rising spending, which has made some investors wary about the long-term returns of these investments. Meta’s capital expenditures are projected to reach nearly $40 billion in 2024, which is higher than previously expected, and further increases are anticipated in 2025.
This concern contributed to Needham & Company issuing an “Underperform” rating on Meta shares. Consequently, a prudent approach for cautious investors could be to wait until mid-month to gauge how the market responds to tech earnings and the upcoming U.S. election.
If you believe in Meta’s long-term value but prefer to snag a bargain, this cautious strategy might be wise.
Next Steps for Investors
Regardless of strategy, Meta shares are positioned interestingly right now, making it a stock to watch closely.
With rising earnings, support from analysts, and ongoing market momentum, there are compelling reasons to be optimistic about Meta’s growth prospects in the future. Investors looking to capitalize on a short-term dip might consider acting quickly, while those who are comfortable waiting may benefit from postponing decisions for a few weeks.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
