Meta Platforms Inc (META) Com USD0.000006
HL comment (2 February 2024)
Meta's revenue rose 25% to $40.1bn in the fourth quarter, which was better than expected. That was largely due to increased advertising revenue. There was a 22% reduction in headcount, now at 67,317. Overall lower costs helped contribute to operating profit rising 156% to $16.4bn.
There was an 8% increase in the number of daily users of Meta's apps, including Facebook, WhatsApp, Messenger and Instagram, to 3.2bn.
The group generated free cash flow of $11.5bn, more than double last year. Net cash was $47.0bn as at the end of December.
Meta announced its first-ever quarterly dividend of $0.50 per share. The group "intends to pay a cash dividend on a quarterly basis going forward."
First-quarter revenue's expected to be $34.5bn - $37.0bn, which is also higher than analysts expected. Total expenses are anticipated being unchanged at $94 - $99bn.
The shares rose 16.3% in pre-market trading.
Meta's results have surprised the market in a good way. The introduction of a dividend was a very welcome addition, and it's nice to see the group's considerable cash hoard being put to use in this way.
The concerns about advertising spending are in the rear-view mirror, and this has seen markets breathe a sigh of relief too.
While classic digital advertising remains the core of this tech giant, the future is a lot more exciting. A host of AI products and services are in the pipeline, which represent enormous potential. Things like AI-driven recommendations have the potential to keep attention on apps like Instagram for longer, although the exact plan and margin connotations of AI are still a bit murky.
We're encouraged that spending on untested products has partly been redirected to getting Meta's main house in order. But the other grand plan - the Metaverse - is still churning away in the background - it's not been given up. And we continue to think there could be exciting times ahead, it's just difficult to predict when the good times might roll - and there are likely to be ups and downs along the way.
There are still some concerns around geopolitical unrest in the Middle East and what this could mean for advertising demand. There are also some questions surrounding Chinese e-commerce demand given concerns there. Management remain confident but that's something to monitor.
Regulatory risk also can't be ignored. Data privacy, misinformation, user care to name just a few are some of the ongoing risks being monitored. The potential for fines or even fundamental changes to the operating model can't be ruled out.
Meta generates bucket loads of free cash flow and the balance sheet's in good order, so it has the firepower to invest for growth and stomach ups and downs. The market will instead remain focussed on how well the group's managing the balancing act between margin growth and nurturing moonshots.
Meta's valuation has seen a sharp revision upwards this year overall, and we share a lot of the enthusiasm. Billions of people use one of Meta's apps every day and its newfound focus is the right move. But the stock is likely to remain volatile, thanks to a combination of tough macro-economic conditions, and lingering confusion around plans for long-term growth.
Meta key facts
Forward price/earnings ratio (next 12 months): 22.2
Ten year average forward price/earnings ratio: 26.3
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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