Meta Platforms stock rose 10% on Thursday after the social media company reported blowout earnings
Meta Platforms stock surged Thursday after the company announced its second quarter earnings results which exceeded analysts’ expectations.
The Magnificent 7 stock generated revenue of $39.1 billion, a 22% rise over the same quarter last year. Analysts had predicted revenue of $38.3 Billion. Net income increased by 73% over the past year to $13.5 billion or $5.16 a share. This was a huge improvement over the $4.70 per share estimate.
Meta stock has now gained 48% in the last 12 months and 64% YTD. Only NVIDIA’s (NASDAQ:NVDA), one of the Magnificent Seven, has performed better.
Operating Margin Expands to 38%
Operating Margin Expands to 38%
The social media giant had a great quarter as all of its key metrics rose. The number of daily users (DAP) of its platforms increased by 7% during the June quarter. This equates to an average of 3.3 Billion people per day.
Mark Zuckerberg, CEO of Facebook, cited the progress made in increasing the number of users aged 18-29 on its platforms. He also praised Threads, the company’s newest social media platform, which has already attracted close to 200,000,000 monthly users.
The average price of an ad also increased by 10%. Meta’s main source of revenue is advertising on its websites, which generated revenue of $38.3 billion, an increase of 22% over the previous year. Reality Labs’ virtual reality Metaverse made just 353 million dollars, but this was an increase of 28% over the same quarter last year.
Further, costs and expenses increased 7%, to $24.2 billion. However, the firm’s higher-than-anticipated revenue allowed it to increase its operating margin to 38% from 29% during Q2 2023.
All In on AI
All In on AI
Meta continues to invest heavily into AI, and Zuckerberg views it as a key driver of growth, not only within Metaverse, but across the entire company.
AI can also be used to create creative ideas. For example, in advertising, AI will help advertisers reach a specific audience.
Zuckerberg said, “In the long run, advertisers will be able to give us a budget and a business goal, and we will do the rest.” “I think it’s going to be a big deal.”
Zuckerberg also cited growth of Meta AI assistant. He said that it is on track to become the most used AI Assistant by the end 2024.
The company has also launched AI Studios, a tool that allows users to create their AIs and interact with them across all Meta apps. It also sees great potential for Business AI, a program that allows businesses to have their AI capabilities.
Zuckerberg said: “I think that over time, just as every business has a web presence, a social network presence, and email addresses, in the future, I think that every company will also have an AI agent with which their customers can interact.” “Our goal is to simplify the process for small businesses, and eventually all businesses, to integrate their content and catalogs into an AI agent which drives sales and saves money.”
Meta’s outlook shows that its full-year capital expenditures have increased to a range between $37 billion and $40 billion. This is largely due to the spending on AI. The company expects a significant increase in capital expenditures in 2025 as it invests in artificial-intelligence research and product development.
Should I buy Meta stock?
Should I buy Meta stock?
Meta expects revenues to be between $38.5 billion and $41 billion for the third quarter. This is a slight increase over Q2 at its high end.
The full-year expenses are expected to be between $96 billion and $99 billion. This is in line with previous guidance. This money will go towards product and AI development, especially within Reality Labs as it looks to scale that ecosystem.
Investors are usually happy to see that Meta is increasing its AI spending, as this not only signifies that Meta is investing for future growth but also creates opportunities for growth within the AI universe.
Meta stock received a number of price target increases after earnings due to its growth in advertising, users and AI investments.
Morgan Stanley, Goldman Sachs and Wells Fargo raised their targets. Other major Wall Street firms that did so included Citigroup, Bank of America (Citigroup), Bank of America, Stifel Barclays and Piper Sandler.
Meta’s price target was $550. However, after Thursday’s upgrades, that number will rise.
Meta stock is on fire but it’s still trading at just 24 times earnings. It has plenty of room for growth. Magnificent Seven is a stock that investors should consider as a long term investment.
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