Tech Titans Report Q3 Earnings: What to Expect From Meta, Amazon

Meta will lap a very easy quarter in Q3 ’23, where Q3′ 22 saw an 11% EPS miss on a 1% revenue beat. It was the poor results of Q3 ’22 that forced META to address operating expenses, which drove the operating margin down to 20% in Q3 ’22 from a peak of 48% in December ’20. From that quarter forward, META has improved the key margin. Since that earnings release, Meta stock has risen from $99 back to $300.Expand the above table and take a look at META’s margin history since late 2020.

Valuation: After falling 29% in 2022 EPS is expected to rise 37% in 2023, and the expected, average 3-year EPS growth rate for META is 26%, with a 19x multiple currently. Meta is expected to average 13% revenue growth over the next 3 years. AWS , which is 16% – 17% of Amazon’s total revenue has seen yoy revenue growth slow markedly over the last 7 quarters:While sell-side analysts have been reluctant to assign a reason for the AWS slowdown, it’s clear that post-Covid, perhaps adoption during Covid slowed as corporations exited the pandemic.

Morningstar Star has a $150 fair value estimate on AMZN versus its current price of $130 – $135, so the e-commerce giant is still thought to be slightly undervalued versus that estimate. The big issue for AMZN is that they expanded too quickly during 2020 and 2021 or in the midst of the pandemic to keep up with demand, and now have had to “right-size” the business to be able to leverage revenue growth.

I still remain positive about tonight’s earnings reports and tech in general headed into Q3 ’23 earnings releases. Alphabet faces the easiest comp’s versus Q3 ’22, I still like Microsoft and Amazon for longer-term positions for clients and have been for the last 12 – 13 years, while the smallest weight is META, only because of Cambridge Analytica, and whatever Metaverse seems to be or could be in the tech sector.Take all of this with substantial skepticism and a considerable grain of salt.

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