Amid the recent surge in tech stocks, Meta Platforms (META) stock has been on an absolute tear, skyrocketing 120% over the past six months, crushing the 14% rise in the S&P 500 index. With its 6% increase in thirty days, META stock is up a breathtaking 151% year to date, compared with a 18% rise in the S&P 500 index.
The social media giant is set to report second quarter fiscal 2023 earnings results after the closing bell Wednesday. Given the strong momentum the stock has been on, investors want to know how much better can things get, especially after the company suffered the biggest losses among its FAANG peers in terms of market cap percentage in 2022. Wall Street has rewarded the company for its combination of cost-cutting efforts and the fundamental improvement CEO Mark Zuckerberg has made to right-size the business.
Its management has certainly pushed all of the right buttons, including various cost optimization initiatives. Amid a decline in the digital ad business at its core Facebook and Instagram products, Meta has enacted various cost-cutting initiatives to boost profitability, many of which have enabled Meta to lower its 2023 expense guidance on two occasions including most recently, lowering it to $86 to 92 billion from prior $89 to $95 billion.
These cost cutting initiatives not only puts the company in a much stronger financial standing in the near term, it is poised to improve in the long term as cost efficiencies are further realized. Then there is the recent launch of Threads, the company’s new social media app, which has already surpassed 100 million users, ranking it as the fasted adopted app of all time. The question investors want to know is whether Meta can monetize Threads given that so many people are already using it? This is one of many question analysts will ask during the conference call on Wednesday.
For the three months that ended June, the Menlo Park, Calif.-based company is expected to earn $2.91 per share on revenue of $31.12 billion. This compares to the year-ago quarter when earnings came to $2.46 per share on revenue of $28.82 billion. For the full year, ending in December, earnings are projected to rise 37.5% year over year to $11.81 per share, while full-year revenue of $126.96 billion would rise 8.9% year over year.
The near 40% rise in full-year earnings per share is the result of the aforementioned various cost cutting measures the company has undertaken to become leaner and more profitable. There is also optimism that Meta can easily surpass its year-over-year revenue and profit comparisons as the global digital ad spending is expected to grow to roughly $422.8 billion this year, rising 7.2% year over year. The company on Wednesday must continue to show gradual revenue improvements in that area.
In the first quarter, Meta earned an adjusted $2.20 per share on $28.65 billion in revenue, beating EPS by 23 cents, while revenue was supposed by roughly $1 billion. During the quarter, Facebook ended with 2.99 billion monthly active users and 2 billion daily active users. For the wider “family of apps” (including Instagram and WhatsApp), daily active people rose 5% year over year to 3.02 billion, while monthly active people rose 5% to 3.81 billion, both beating consensus.
Given that it boasts an estimated 3 billion monthly active users on its family of products, Meta must continue to flex its growth muscle within its core digital advertising business. That is what the market will want to see in order for the stock to maintain its momentum, along with continued improvements in top and bottom lines, with strong revenue guidance.
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