Up 36% YTD, What To Expect From Meta Platforms In Q1?

Meta Platforms (NASDAQ: META) is scheduled to report its fiscal Q1 2024 results on Wednesday, April 24, 2024 (after market close). We expect the stock to beat the consensus estimates of earnings and revenues. The company surpassed the street expectations in the last quarter, with revenues increasing 25% y-o-y to $40.1 billion. The growth was primarily due to a 24% rise in advertising revenues. Further, the key metrics improved in the quarter – daily active users (DAUs) (up 6%), ad impressions (21%), and average price per ad across its Family of Apps (2%). We expect the Q1 results to be on similar lines. Our interactive dashboard analysis on Meta Platforms’ Earnings Preview has more details. 

Amid the current financial backdrop, META stock has seen extremely strong gains of 75% from levels of $275 in early January 2021 to around $480 now, vs. an increase of about 30% for the S&P 500 over this roughly 3-year period. However, the increase in META stock has been far from consistent. Returns for the stock were 23% in 2021, -64% in 2022, and 194% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that META underperformed the S&P in 2021 and 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Communication Services sector including GOOG, NFLX, and DIS, and even for the megacap stars TSLA, MSFT, and AMZN. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.  Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could META face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Meta Platforms’ valuation is $485 per share, which is slightly above the current market price of around $481.

(1) Revenues expected to edge past the consensus

Meta Platforms’ revenues grew 16% y-o-y to $134.9 billion in FY 2023. It was driven by a similar increase in the advertising income. In terms of the key metrics – DAUs and ad impressions improved in the year. However, the average price per ad decreased 9% y-o-y due to tough macroeconomic conditions. Notably, the average price per ad increased in Q4. We expect the same trend to continue in Q1. Overall, Meta Platforms’ revenues are estimated to touch $157.6 billion in FY2024.

Trefis estimates Meta Platforms’ fiscal Q1 2024 net revenues to be around $36.81 billion, 2% above the $36.14 billion consensus estimate. 

(2) EPS to top the consensus estimates

Meta Platforms Q1 2024 adjusted earnings per share (EPS) is expected to be $4.36 per Trefis analysis, 1% above the consensus estimate of $4.31. The company’s net income rose by 69% y-o-y to $39.1 billion in FY 2023. It was partly because of growth in revenues and partly due to a favorable drop in the total expenses as a % of revenues. We expect the same momentum to continue in the first quarter. Overall, we estimate an annual GAAP EPS of around $19.43 in FY2024.

(3) Stock price estimate is just above the current market price

We arrive at Meta Platforms’ valuation, using a GAAP EPS estimate of around $19.43 and a P/E multiple of 25x in fiscal 2024. This translates into a price of $485, which is slightly above the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

[1] Returns as of 4/22/2024
[2] Cumulative total returns since the end of 2016

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