Meta Platforms’ (META) upbeat first-quarter revenue outlook implies a substantially higher-than-expected growth trajectory through the rest of the year, as the Facebook parent continues to see healthy engagement trends and improving monetization, Wedbush Securities said Friday.
Revenue is set to be in a range of $34.5 billion to $37 billion for the ongoing quarter, assuming a neutral foreign-currency impact, the company said late Thursday. The current consensus on Capital IQ is for revenue of $35.64 billion, while Wedbush raised its own estimate to $35.92 billion from $33.57 billion.
Shares of Meta, which also owns Instagram and WhatsApp, jumped 17% in recent premarket trading.
Meta has several “sustainable drivers” to support growth, such as improving monetization of new ad formats and surfaces, with reels becoming accretive to revenue and robust growth in click-to-message ad revenues, according to Wedbush. The company is also implementing artificial intelligence tools to diversify its advertiser base, while benefiting from an accelerating digital advertising industry, the brokerage said.
“Meta’s notably strong (first-quarter) guidance is a positive read through for the broader digital advertising industry,” Wedbush analysts led by Scott Devitt said in the note. “While we acknowledge that Meta is benefiting from company-specific tailwinds, we think the implication for the health of the digital advertising ecosystem in 2024 is incrementally positive for the entire group, including Pinterest (PINS) and Alphabet (GOOG, GOOGL).”
For the December quarter, Meta delivered per-share earnings of $5.33, jumping from $1.76 a year earlier and surpassing the Street’s view for $4.94. Revenue surged 25% to $40.11 billion, topping market estimates of $39.17 billion. The average price per ad increased 2% annually as aggregate ad impressions climbed 21%.
The company reiterated its full-year 2024 expense outlook of $94 billion to $99 billion, “which should support several hundred basis points of margin expansion versus 2023,” according to Wedbush. Senior management indicated during a late Thursday earnings call that the company plans to resume headcount growth at a more modest rate in the future, concurrent with a leaner structure.
Meanwhile, Meta Chief Executive Mark Zuckerberg’s overall tone and commentary during the conference call showed a clear signal about the company’s strategy to eventually expand the scope of how it can leverage AI in the future, RBC Capital Markets said in a note.
“We’ll be building the most popular and most advanced AI products and services,” Zuckerberg told analysts on the call. “It’s clear that we’re going to need our models to be able to reason, plan, code, remember and many other cognitive abilities in order to provide the best versions of the services that we envision.”
Both Wedbush and RBC maintained their respective outperform ratings on Meta’s stock. Wedbush raised its 12-month price target on the company to $520 from $420, while RBC lifted the target to $565 from $400.