Was Meta Platforms Inc.’s “objectivity excellent” earnings report a sign of the Facebook parent company’s ever-growing dominance—or was the third quarter “as good as it gets”?
That question seems to be weighing on Wall Street Thursday, as Meta shares META, -4.17% traded down more than 3% premarket after the company crushed expectations late Wednesday with its third-quarter results, which showed 24% growth in advertising revenue. At the same time, management gave investors a few reasons to question the near-term future. For one, the fourth-quarter outlook “was not only wide at 13 -24% revenue growth, but the mid-point pointed to sequential decline,” noted Bernstein analyst Mark Shmulik.Meta called out geopolitical uncertainty related to the Middle East conflict while also noting that the third quarter continued to benefit from Chinese e-commerce platforms that spent heavily on advertising.
“To add fuel to this new fire, some investors are already questioning whether Chinese ad spend contribution—which was once again called out as a helpful tailwind—may one day soon disappear creating challenged going forward,” Shmulik added.
It’s been a year since Meta spooked Wall Street with a sharp spending outlook that drove a massive one-day post-earnings selloff in shares and forced management to pivot into a period of hiring discipline and broader cost cuts.“The strength of 3Q23 suggests they are on to something real,” he wrote, while maintaining a buy rating but boosting his target price to $411 from $372. “We assume momentum continues.