Meta’s Q4 Earnings Beat Expectations; Growth Likely to Return in the Second Half

Meta Platforms Stock at a Glance

• Current Morningstar Fair Value Estimate: $260
• Meta Platforms Stock Star Rating: 5 stars
• Economic Moat Rating: Wide
• Moat Trend Rating: Stable

Meta Platforms Earnings Update

Meta Platforms (META) reported better than expected fourth-quarter results despite currency headwinds, macro uncertainty, and deceleration in overall digital advertising growth. Meta also appears to have improved ad conversions on its apps and measurability, increasing demand from advertisers and lessening the impact of Apple’s moves. On the user front, the firm’s network effect remains intact, displayed by daily and monthly user growth.

We are pleased with management’s effort to exert cost control while accelerating top-line growth. In addition, the firm’s continuing aggressive share buyback during the quarter and another buyback authorization support our Exemplary capital allocation rating.

Trimming Meta’s Growth Projections

We have slightly lowered our growth projections as advertisers appear increasingly hesitant amid a possible economic downturn, but these changes haven’t had a material impact on our $260 fair value estimate. While the stock was trading approximately 19% higher after hours, it remains at only 70% of our fair value estimate.

The unfavorable macro environment and currency exchange headwind drove Meta’s fourth-quarter revenue down 4.5% year over year. On a constant-currency basis, total revenue increased 2%. We were pleased with year-over-year improvement in user engagement as growth in Facebook and family of apps daily users (4% and 5%, respectively) outpaced monthly user growth (2% and 4%). Higher engagement drove impressions sold 23% higher from the prior year, offset by a 22% decline in average ad prices due to the supply increase and weak demand. Lower ad prices reduced user monetization 8% from last year.