Meta Platforms, Inc. META is widely expected to have ended its “year of efficiency” with a flourish, with an analyst at KeyBanc Capital Markets largely upbeat about the fourth-quarter performance.
Analyst’s View: With an Overweight rating on Meta shares, Justin Patterson upped his price target by 22% from $380 to $465, reflecting optimism about the company’s prospects.
KeyBanc’s updated price target is just shy of the Street-high number of Mizuho Securities at $470.
Evaluating Meta: “Meta ended the year with further momentum in its ad products, particularly Reels,” said Patterson. Reels, the short-video offering from Meta, is now successfully competing with connected-TV for linear-TV budgets, indicating strength.
Q4 Expectations: When Meta reports its quarterly results after the market close, KeyBanc expects revenue of $39.9 billion, marking 24% year-over-year growth and a 2% beat versus the consensus. The firm also anticipates potential revenue overshooting based on the strength in Reels and Meta Advantage+.
Patterson models earnings per share of $5.30, foreseeing revenue upside positively impacting the bottom line. If the analyst’s expectation materializes, Meta would beat consensus estimates by 8%, reflecting robust performance.
Looking Ahead: For the first quarter, Patterson expects revenue of $32.8 billion to $35.2 billion and foresees Meta maintaining its annual operating expenditure and capex targets. Moreover, he anticipates the Facebook Reality Labs losses to widen due to continued investment in mixed-reality and wearable products.
Focus Areas On Earnings Call: Patterson listed areas for clarity, including AI ambitions, Reels, FRL division performance, and efforts to boost Threads engagement—underscoring the importance of these factors for investors.
- AI’s role in sustaining revenue growth in the coming quarters
- Performance of Reels in capturing the broader video budget market
- Developments in FRL division, influenced by the entry of Apple’s Vision Pro and Meta’s Ray-Ban product
- Strategies to enhance Threads engagement
Citing a stronger ad market and early signs of Reels gaining ground, KeyBanc raised its revenue and earnings per share estimates for Meta, reflecting an optimistic stance on the company’s future prospects.
In premarket trading, Meta shares rose 0.37% to $402.52, according to market data, signaling positive investor sentiment ahead of the earnings release.
