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Meta earnings: is it time to pay for Mark Zuckerberg’s expensive dream?

Meta will announce the company's Q4 and FY 2022 financial results after the market close on 1 February 2023. As Meta has transformed to a speculative turnaround bet, is it time to pay for Mark Zuckerberg’s expensive dream?

Meta Source: Bloomberg

Meta earnings date

Meta Platforms (NASDAQ: META) will announce the company's fourth quarter (Q4) and full-year 2022 financial results after the market close on Wednesday, 1 February 2023.

Meta earnings expectation

Meta's forecasted earnings per share (EPS) for the quarter is $2.12, a 42% decline from the same quarter in the previous year but a 29% improvement from the third quarter (Q3).

EPS Source: Meta
EPS Source: Meta

Meta earnings key watch

Revenue and Cost

According to Meta’s forward guidance in October, the company expected the Q4’s total revenue would be in the range of $30-$32.5 billion, while Wall Street expected the actual number would be close to the lower end, around $31 billion, an approximately 7% to 10% decline from the same quarter in 2022.

Meta’s core business, online advertising, which generates 98% of Facebook’s revenues, is struggling. In Q3, the average price per ad plummeted by 18% year-over-year despite the ad impressions delivered across Meta’s apps increasing by 17%.

On the other hand, Meta’s costs and expenses are surging.

Total costs and expenses in Q3 were $22.05 billion, an increase of 19% year-over-year. Even worse, the money spent in Q4 and the new year are expected to go higher. As its chief financial officer (CFO) mentioned in the Q3 report, there will be an estimated $900 million additional charges in Q4 and a further $2 billion in 2023 related to consolidating office facilities footprint.

To offset the mounting bills, Meta laid off over 11,000 employees in early November, reducing its workforce by 13% and announcing a hiring freeze through Q1 2023. But even so, its stuff headcount at the end of 2023 will only down to the same level as Q3 2022.

Capital expeditures Source: Meta
Capital expeditures Source: Meta

Expensive commitments

Aside from subdued user growth and rising competition in the digital ad business, investor’s predominant concern is the company’s long-term growth capability.

To address these concerns, Meta has committed to the ‘future-focus areas’ since 2021, such as artificial intelligence (AI) infrastructure and Reality Labs investments, which cost more than 3.6 billion dollars in the previous quarter and are likely to continue burning money in 2023. As Meta’s CFO confessed recently: ‘An increase in AI capacity is driving substantially all of our capital expenditure growth in 2023’.

Therefore, in the upcoming earnings meeting, the Meta platform has to try very hard to convince shareholders that these ‘forward-looking’ business units can emerge as Meta’s profit powerhouse in the ‘not-too-far-away’ future.

Segment results Source: Meta
Segment results Source: Meta

Meta share price

Meta suffered its worst yearly decline last year and lost over $450 billion of its market cap, which placed Meta among the ten worst-performing S&P 500 stocks in the past calendar year.

From the first trading session in the new calendar, Meta’s price has gained 34% and now climbed to the highest level in four months. According to the daily chart, the price of Meta has reached a critical point where a pack of resistance is just around the corner—the 200-day moving average (MA) and the previous massive support level at $154 are all the hurdles to clear. On the flip side, any slip can expect strong support from around $138, where the March 2020 low sits, before touching the lower boundary for the current moving trajectory and the 100-day MA.

Meta daily chart Source: IG charts
Meta daily chart Source: IG charts

Meta earnings summary

Even with its recent cost-cutting measures and the company’s demonstrated confidence in growing its community base, it’s not easy for investors to neglect that the losses in its ‘future-focused’ division are mounting and yet to see the light at the end of the tunnel. Hence, as Meta has transformed from a superior growth stock to a speculative turnaround bet, the question is, will investors keep paying for Mark Zuckerberg’s expensive dream?

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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