Stock Story -
What Happened: Shares of social network operator Meta Platforms (NASDAQ:META) jumped 9.9% in the morning session after the company reported second quarter earnings results. Meta slightly beat analysts' revenue guidance expectations for the next quarter. In addition, this quarter's revenue and EPS narrowly outperformed Wall Street's estimates.
Looking ahead, the company expects to continue investing in Reality Labs as its Ray-Ban Meta AI glasses are seeing strong traction. Overall, this quarter seemed fairly positive, and shareholders should feel optimistic. After the initial pop the shares cooled down to $496.63, up 4.7% from previous close.
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What is the market telling us: Meta's shares are quite volatile and over the last year have had 5 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 21.9% on the news that the company reported fourth-quarter results with revenue, operating income, and EPS, all exceeding analysts' estimates. These beats were driven by better-than-expected daily active users along with a 21% year-on-year increase in ad impressions. Meta also saw a 2% tailwind in advertising pricing. Commentary across the sector suggests the advertising market is likely to rebound in 2024, partly explaining why Meta had a strong quarter.
Looking ahead, Meta's Q1 2024 revenue guidance topped Wall Street's forecast, while its anticipated full-year 2024 capital expenditures came in slightly higher. The company expects this capex growth to come from investments in servers, including AI and non-AI hardware (you're welcome, Nvidia (NASDAQ:NVDA)), and data centers as it ramps up construction for its new data center architecture. These investments will be key for its open-source large language model, Llama, to successfully compete against OpenAI's closed-source ChatGPT. Perhaps the most interesting part of the quarter was the announcement of a quarterly dividend - the first in the company's history. Overall, this was a really good quarter that should please shareholders.
Meta is up 43.3% since the beginning of the year, and at $496.63 per share it is trading close to its 52-week high of $539.91 from July 2024. Investors who bought $1,000 worth of Meta's shares 5 years ago would now be looking at an investment worth $2,575.
