Overview of Meta’s Fourth Quarter Results
After a disastrous year in the stock market, Meta must demonstrate that it can cut costs to protect profitability and cash flow in what will be another tough year in 2023.
When will Meta release Q4 results?
Meta is expected to release its fourth-quarter results after the US markets close on Wednesday, February 1, 2023. A conference call will take place on the same day at 5:00 pm ET.
Consensus on the Benefits of Meta Q4
Meta is expected to record a 6.2% year-on-year decline in revenue to $31.57 billion in the fourth quarter, while diluted earnings per share will fall 39% year-over-year to $2.25.
If that is achieved, Meta could report a 1.6% drop in annual revenue to $116.03 billion and a 34% drop in annual earnings per share to $9.06.
Meta Q4 earnings overview
Meta was the biggest loser in big tech in 2022, when it lost almost two-thirds of its value due to a stagnant ad market and social media stocks faced many headwinds.
Meta is still adapting to Apple’s privacy changes, which have made it harder for users to target ads and switched to less profitable video formats in response to stiffer competition from companies like TikTok.
These additional hurdles mean that social media ad prices are dropping much faster than other digital platforms.
For example, Facebook prices fell about 18% in the third quarter, while a Google search for Alphabet showed a much more moderate decline of 5%. Meanwhile, costs continue to rise and profits are under pressure.
Combined, this should result in Meta reporting a third consecutive quarter of lower sales and a fifth consecutive quarter of lower earnings when the results are released.
Markets also expect Facebook’s daily active users to drop to 1.90 billion at the end of 2022 from 1.98 billion at the end of September, which will only exacerbate its problems and fuel further speculation. peak. Any new signs that its core business is suffering could be significant, given the absence of major new catalysts on the horizon.
Will Facebook’s DAUs shrink in the fourth quarter?
(Source: Bloomberg, Forex.com)
In the absence of a rebound in growth, the best Meta can do is demonstrate that it controls costs and protects profitability during these difficult times. This would help give him confidence that he can ride out the storm and get back in better shape when he finally does get well.
Meta is already on the move after cutting 11,000 jobs, about 13% of its workforce. While this is one of the largest workforce cuts announced to date, it is still marginal given that Meta’s workforce has more than doubled since the start of the pandemic. This should help improve free cash flow, which is expected to top $2.1 billion in the fourth quarter from less than $200 million in the third quarter.
Meta has doubled its workforce since the start of the pandemic
(Source: Metareports, Forex.com)
Another controversial topic that is expected to take center stage in 2023 is Meta’s costly investment in the metaverse. Meta is spending billions on a project that is unlikely to generate any profit in the coming years, and this is one of the most difficult times for its mainstream social media and advertising business.
In fact, its Reality Labs division, which is in charge of metaverse projects, is expected to post a $3.9 billion loss this quarter, the biggest ever. This could see the unit burn more than $13 billion in 2022 overall, with it expanding even further in 2023.
The Meta Continues to Plunge Billions into the Metaverse
(Source: Bloomberg, Forex.com)
The company remains committed to its future in the Metaverse, but cutting back on investment here would be the easiest way to protect profits without affecting the business that drives the Meta today, though it risks losing leadership in what it believes in. this is her long-term opportunity.
Meta could try to counter the criticism surrounding its investment in the metaverse by providing new catalysts that could generate new revenue streams.
The company said it expects its WhatsApp and Messenger monetization efforts to bear fruit long before the metaverse.
What are the prospects for Meta in 2023?
2022 is expected to see Meta’s first decline in annual revenue and earnings since its IPO in 2012, a deal that saw its valuation drop by more than $500 billion over the past year.
Meta has warned that earnings will remain under pressure in 2023, with markets expecting earnings per share to fall another 13% this year, eclipsing the expected return on revenue growth. Profits for most big tech companies should start rising again this year as they start to face weaker comparisons.
This suggests that Meta may again fall behind in terms of earnings in 2023, although its valuation is well below the market average, and its technology rivals have once again attracted buyers to the market who are anticipating a potential recovery in the market after the economic recovery.
It also suggests that Meta is facing the biggest pressure to cut costs and shrink as margins shrink to their lowest level on record in 2023. As a result, its forecast for this year, especially in terms of costs and capital investments, could be very high. . influence how the stock price reacts to the results.
Without further action, we could see free cash flow fall more than 25% in 2023 to around $10.9 billion, the lowest free cash generation since 2015. This is important when you consider that more than $17 billion is planned to be invested in Reality Labs this year alone. , with peak losses before starting to decline from 2024.
Meta has budgeted $34 billion to $39 billion in capital spending in 2023 and said operating expenses are expected to come down as jobs are cut and savings are sought. He said his numbers would remain broadly stable this year.
Is Meta stock undervalued in the stock market?
Meta shares are currently trading near four-month highs, but the stock is still down 62% from the all-time highs we saw in September 2021.
Even after the recent rally, Meta is trading at a mixed price-to-earnings ratio of 13.5x. This remains well below the broader market, given the tech-laden Nasdaq 100 which is trading at around 23.0x and the S&P 500 at 19.0x. It’s also below the five-year Meta average multiple of 18.8x. This means the Meta is cheap, but that’s because the Meta seems to be more risky than the other Big Tech members right now. It looks like the Meta currently offers more risk with more potential reward.
This explains why Meta shares surged in early 2023 even though the outlook for growth next year is bleak.
However, some investors see an opportunity to buy now to reap the rewards when earnings return to gains as Wall Street forecasts net income will start rising again in the second half of 2023.
What’s Next for the Stock Market for Meta Shares?
Meta shares are up nearly 60% on the stock exchange since hitting a 7-year low in early November 2022, though higher levels are harder to come by.
The RSI has moved into overbought territory and this has kept stocks from rising above $144 in the past three trading sessions.
A move higher here would allow it to push the stock market to new four-month highs and open the door to $155 to restore the support we saw in the second half of 2022. This also corresponds to a 200 day move. average.
Source: Tradingview, Stone X
The 58 brokers that service the stock see slightly more upside potential given the average price target is $156.50.
The 100- and 50-day moving averages could provide some support if they come under pressure again, though $113 could be more reliable.
Any drop below could result in a fall from $108.50.
Meta could reach new highs in four months if it finds higher positions
Take advantage of extended trading hours
Meta will post profits after the US markets close and most traders have to wait until they reopen the next day before they can trade. But by that time the news had already been digested, and after several hours of trading, there was an instant reaction in stock prices.
In order to react immediately, traders should close their positions on the stock exchange during the pre- and post-trading sessions.
With that in mind, you can take advantage of our service that allows you to trade Meta stocks and other technology stocks using extended trading hours.
While trading before and after trading hours creates opportunities for traders, it also creates risks, especially due to lower levels of liquidity.
» Learn more about extended trading hours.
Joshua Warner, FOREX.com » Official site
Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.