Meta faces 'extraordinarily high expectations.' Can earnings clear the bar?

By Jon Swartz

Facebook's parent company is expected to report strong quarterly earnings Wednesday

Meta Platforms Inc. shares are on fire. Chief Executive Mark Zuckerberg's personal worth now exceeds that of Elon Musk. And the social-networking giant just launched its most aggressive artificial-intelligence product to date.

Things are going swimmingly for Facebook's parent company (META) as it prepares to report first-quarter results on Wednesday after markets close. Analysts polled by FactSet are expecting net income of $4.32 a share on revenue of $36.14 billion.

TD Cowen's John Blackledge expects revenue growth to accelerate to 26.3% when the first-quarter results come out, "driven by strengthening Reels engagement and monetization." He raised his price target on Meta shares to $590 from $500 in a note earlier this month.

In a check of its ad channel, Evercore ISI analyst Mark Mahaney saw an "improving overall ad environment" and "consistently positive advertiser sentiment towards META's ad campaign capabilities and AI-powered ad products innovation."

Meta's anticipated mega quarter is expected to be exemplified by the company's Advantage+ suite of ad products, Reels revenue and - yes - even the venerable Facebook, which continues to perform well after more than 20 years. But it will also be defined by AI and its role as the centerpiece of Meta's immediate future.

"Meta is facing extraordinarily high expectations for Q1 2024. In its last earnings report, for Q4 2023, the company surprised just about everyone by reporting record revenue above analyst estimates," Debra Aho Williamson, chief analyst at Sonata Insights, said in a note Friday. "I believe Meta will continue to show strength, reporting revenue at or above guidance, which would represent 29% or higher year-over-year growth."

Jefferies analyst Brent Thill, in a note titled "Hard to Argue with Excellence," predicted Meta's first-quarter revenue will land in the high-end of the company's guidance range of $34.5 billion to $37 billion. He's also expected a second-quarter outlook above the Street's $38.3 billion estimate.

In hiking Meta's price target to $590 from $535, Bernstein analyst Mark Shmulik said he and his team "continue to like Meta on a longer-term horizon, with many more tricks up their sleeves including Click to Message ads, WhatsApp business messaging monetization, GenAI ads and so on."

For now, the chief beneficiary of Meta's largesse is Zuckerberg, whose total net worth was $171 billion as of Sunday, surpassing Musk's $168 billion, according to Bloomberg's Billionaire Index.

On Friday, Meta's stock (META) climbed 1.5% after the company unveiled Llama 3, its latest large language model, to compete with Microsoft Corp.-backed (MSFT) OpenAI and Alphabet Inc.'s (GOOGL) (GOOG) Gemini. Meta shares have soared 124% over the past year. The S&P 500 index SPX, by comparison, is up 20% over the past 12 months.

-Jon Swartz

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-23-24 0746ET

Copyright (c) 2024 Dow Jones & Company, Inc.