Meta Platforms, Inc. (NASDAQ: $META), or Meta, formerly Facebook, Inc., is an American tech conglomerate that owns and operates Facebook, Instagram, WhatsApp, and Threads, amongst other services and products. Based in Menlo Park, CA, the company has a market cap of $1.23 trillion.
On Thursday, February 1, 2024, the company released its Q4 and full-year earnings report. The stock experienced the biggest one-day market cap gain in the stock market’s history after the report came out.
Revamped Capital Allocation Strategy
In the fourth quarter results, Meta announced that it would begin quarterly dividend payouts for the first time. The dividends are part of a wider capital return policy at Meta, which will also involve substantial share repurchases. For the fourth quarter, Meta announced a dividend payout of $0.50.
Meta announced that in Q4, it bought back $6.32 billion worth of stock. The company bought back $20.03 billion worth of stock for the full year. As of the end of the quarter, they had $30.93 billion authorized for share repurchases. The company also announced a $50 billion increase to the share repurchase program.
Q4 Revenue Surge Reflects Efficiency in Capital Allocation
In its Q4 report, Meta revealed a huge upturn in its financial position. The company saw a huge rise in revenue in the quarter, reflecting positively on the company’s capital allocation strategy.
In Q4, Meta’s revenue jumped 25% year-over-year to $40.11 billion. The full-year revenue was up 16% to $134.90 billion. This impressive growth is due to a 21% yearly rise in ad impressions across the Family of Apps and a 2% increase in the average ad price for Q4.
Meta’s net income witnessed a tremendous 201% surge in Q4 to $14.02 billion. For 2023, net income jumped 69% to $39.10 billion. Its Q4 diluted EPS was $5.33, a 203% increase Y/Y. Full-year EPS climbed 73% to $14.87.
Strategic Restructuring Pays Off with Improved Margins
For the full year, Meta reported a 22% year-over-year reduction in headcount, in line with restructuring efforts to cut costs. It led to substantially higher operating margins of 41% for Q4 and 35% for 2023.
Meta reported it had cash, cash, and marketable securities of $65.40 billion as of the end of FY23. Free cash flow was $11.50 billion for Q4 and $43.01 billion for the full year. Its long-term debt as of the end of the fiscal year was $18.39 billion.
In a statement, Meta CEO Mark Zuckerberg remarked, “We had a good quarter as our community and business continue to grow.”
Meta Stock Surges to Record High
Meta Platforms’ shares surged to 21.45% as of February, 2, 2024, 01:24 PM in New York, headed for the largest single-day increase in market cap in US stock market history. The stock reached a record high of around $ 478.48, a 12-month rise of 153.17%. Year-to-date, the stock is up 38.01%. It has a market cap of $1.232 trillion.
2024 Revenue Guidance
Meta’s CFO provided upbeat guidance for 2024. The first quarter’s total revenue is expected to be $34.5-$37 billion on an FX-neutral basis.
Total 2024 expenses are projected at $94-$99 billion, consistent with prior estimates. The CFO cited three factors contributing to growth in expenses:
First, Meta anticipates higher infrastructure-related expenses in FY24. Due to their increased capital investment in the recent past, they project an increase in depreciation expenses compared to 2023. Additionally, they project higher operating costs from their larger infrastructure.
Meta also expects an increase in payroll expenses as they make incremental higher in key areas. That will lead to a shift in the workforce composition to more expensive technical hires.
Finally, they are anticipating operating losses from Reality Labs. The costs are related to growing product development efforts in AR/VR and investment in scaling the ecosystem.
For 2024, capital expenditures is projected at $30-$37 billion, up $2 billion from the high end of the previous estimate. Investments in AI and non-AI servers and data centers will drive this increase.
Regulatory Landscape Poses Challenges
The CFO said regulatory challenges, especially in the EU and U.S., could significantly impact the business. The FTC seeks to modify Meta’s consent order, which could introduce restrictions on how they operate. An adverse outcome in the ongoing litigation would hurt their business.
Despite challenges, 2023 was pivotal for Meta. The company enhanced capital discipline, excelled in priority areas, and improved ad revenue. In 2024, Meta aims to build on its strengths while advancing AI and Reality Labs initiatives.
Consensus Price Target Indicates Potential Upside
Based on 29 Wall Street analysts over 3 months, Meta’s average price target is $426.11, ranging from $470 to $370, a 10.66 % downside.
Top analysts like UBS’ Stephen Ju and Seaport’s Aaron Kessler raised their Meta targets to $530 and $510, respectively, citing advertising leadership potential and the dividend’s broad investor appeal. Among analysts, 27 recommend buying Meta shares, while two suggest holding.
Should You Buy META Stock?
Meta’s latest results and strategic moves demonstrate resilience and savvy financial management as the company adapts to an evolving social media landscape. With sturdy user growth, surging profitability, and smart cash allocation, Meta exhibits flexibility despite rising competitive and economic challenges.
By boosting shareholder returns while doubling down on AI investment, Meta aims to sustain growth and cement its status as an enduring leader in connecting people worldwide. If executed successfully, this strategy could propel Meta through future obstacles.
Despite the regulatory risk, Meta continues to grow from strength to strength in each quarter. It dominates its sector, and is undervalued compared to its peers. Based on its current performance, and 2024 guidance, META is a buy.
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