Meta Platforms, Inc. (NASDAQ: $META) is an American tech conglomerate that owns Facebook, Instagram, WhatsApp and Threads, amongst other services and products. Based in Menlo Park, CA, the company has a market cap of over $1trillion.
The company has heavily invested in AI and AR/VR as part of its long-term vision. On Wednesday, April 24, 2024, the tech giant released its first quarter 2024 financial results and full-year earnings report.
Q1 Financial Highlights
Meta reported total revenue of $36.46 billion for Q1 2024, a solid 27% year-over-year increase, surpassing analysts’ expectations of $36.12 billion. This impressive top-line growth and the company’s focus on efficiency led to significant operating margin expansion and a substantial increase in earnings per share EPS.
The operating margin expanded from 25% in Q1 2023 to 38% in Q1 2024, while EPS more than doubled, rising 114% year-over-year to $4.71. Net income soared to $12.4 billion, a 117% increase compared to last year.
Healthy user metrics and advertising revenue growth drove Meta’s strong financial performance, with the company reporting a 7% year-over-year increase in daily active people (DAP) across its Family of Apps, reaching 3.24 billion on average for March 2024. Ad impressions across all of its apps increased by 20%, while the average price per ad rose by 6%. Advertising revenue, which accounts for most of Meta’s total revenue, grew by 27% year-over-year to $35.64 billion, in line with the overall revenue growth.
Meta’s free cash flow for the quarter was $12.53 billion, signaling the company’s strong operating performance. The company repurchased $14.64 billion of its Class A common stock and paid out $1.27 billion in dividends.
As of March 31, 2024, Meta had cash, cash equivalents and marketable securities totaling $58.12 billion, providing ample financial flexibility for future investments and growth initiatives.
Full Year 2024 Guidance
While Meta’s Q1 2024 results were impressive, the company’s guidance for the second quarter disappointed investor sentiment. Meta expects the second quarter’s total revenue to be $36.5 billion to $39 billion, implying a significant deceleration in year-over-year growth compared to the 27% growth achieved in Q1.
For the full year 2024, Meta now expects total expenses to be $96 billion to $99 billion, up from its previous outlook of $94 billion to $99 billion due to higher infrastructure and legal costs. The company anticipates operating losses for its Reality Labs division to “increase meaningfully year-over-year” as it invests in product development and ecosystem scaling.
On capital expenditures for the full year, Meta Management stated it expects to spend between $35 billion and $40 billion, from a prior forecast of $30 billion to $37 billion.
“This increase is due to a continued acceleration of Meta’s infrastructure investments to support its artificial intelligence (AI) product development. “ stated Meta CFO Susan Li.
Meta Stock Performance
Despite the strong Q1 performance, Meta’s stock slid by over 12% in pre-market trading on Thursday as investors reacted negatively to the disappointing second-quarter outlook and increased expenditure guidance. The slide continued into the regular trading session on Thursday, April 25, with the stock falling 11.87% from its previous closing price to $434.9 as of 09:59 AM EDT.
While Meta had seen its stock rally over 39% year-to-date heading into the earnings report, investors’ reaction highlights the heightened expectations surrounding Meta’s growth trajectory and the potential impact of its substantial investments in AI and Reality Labs initiatives on near-term profitability.
Should You Buy META in 2024?
While Meta reported strong Q1 results, the company’s ambitious AI and metaverse investments have raised concerns about near-term profitability. Meta’s disappointing Q2 outlook and increased expenditure guidance weighed heavily on the stock.
However, these investments position Meta for long-term success if executed well. The company’s massive user base, strong free cash flow and healthy balance sheet provide a solid foundation for navigating this strategic transition.
Ultimately, investors should carefully evaluate Meta’s ability to capitalize on emerging opportunities while maintaining a profitable core business. There are numerous alternative tech stocks for investors looking for “monster returns” in the medium term.
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