The stock was up sharply in Thursday trading, but there’s more upside to come over the next 12 months for Meta Platforms (Meta Platforms Stock Quote, Charts, News, Analysts, Financials NASDAQ:META), according to Roth Capital Partners analyst Rohit Kulkarni, who delivered a company note on Thursday where he reiterated a “Buy” rating on the stock.
Social media giant Meta Platforms released its first quarter 2023 earnings on Wednesday, showing revenue up three per cent year-over-year to $28.65 billion and diluted EPS down 19 per cent to $2.20 per share.
“We had a good quarter and our community continues to grow,” said founder and CEO Mark Zuckerberg in a statement. “Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.”
Both top and bottom lines were beats, where the consensus estimates on revenue and EPS were $27.65 billion and $2.03 per share, respectively, according to data from Refinitiv. Meta said its Facebook daily active users were up four per cent from 2022 Q1 numbers to 2.04 billion, while monthly active users were up two per cent to 2.99 billion.
On the road ahead, Meta guided for Q2 2023 total revenue in the range of $29.5-$32 billion.
Kulkarni said the Q1 revenue and earnings were above Roth’s estimates as was the Q2 revenue guidance. The analyst noted a number of other positives from the quarter, including monetization from Facebook and Instagram, which grew 40 per cent and 30 per cent, respectively, on a sequential basis, while Paid Messaging grew 40 per cent. Ad impressions increased by 26 per cent year-over-year, while the average price per ad fell 17 per cent. Daily revenue from Meta’s Advantage+ Shopping campaigns grew by sevenfold over the past six months, while the number of businesses using WhatsApp’s paid messaging service grew by 40 per cent sequentially.
At the same time, Kulkarni noted that the bears are likely to focus on other figures from the quarter, including a $4 billion operating loss from Meta’s Reality Labs segment, with further and greater losses expected over the rest of 2023. As well, Meta’s capex may not come down, with the company’s Gen AI-related investments likely growing compared to the company’s plans a quarter earlier.
With his “Buy” rating, Kulkarni has issued a 12-month target of $255, which at press time represented a projected return of 23 per cent.
“We expect shares to hold these gains near-term, however, the stock might stay range bound, given year-to-date performance. Optimistic estimates could exceed $15/share in earnings for ’24. Applying a ~20x P/E multiple, META shares could find a pathway to $300,” Kulkarni wrote.