So now
Meta Platforms
has become an artificial intelligence play.
The parent of Facebook, Instagram, WhatsApp, and Threads has been rapidly transforming over the past few years. While fundamentals are still primarily driven by its dominance of social media, Meta (ticker: META) not all that long ago declared itself to be a play on the metaverse, going so far as to change its name. More recently, Meta has become a “year of efficiency” play, cutting more than 20,000 jobs in a bid to boost profitability. But CEO Mark Zucerkberg’s attentions have shifted again—and now, it’s all about AI.
All of those topics are going to be on the table when Meta reports second-quarter results after the close of trading on Wednesday. There’s going to be a lot to talk about. And with the stock up about 145% so far this year, attention will be higher than ever.
For one thing, the Street has recently become increasingly convinced that the online advertising environment is stabilizing, which could spur stronger-than-expected financial performance. Meta’s forecast for the quarter called for revenue of between $29.5 billion and $32 billion; Street consensus sits at $31 billion, which would imply 8% growth, up from 3% in the March quarter. Analysts see profits of $2.89 a share, up from $2.46 a share in the year-earlier quarter.
Mizuho analyst James Lee wrote in a recent earnings preview note that the setup for earnings “appears favorable,” based on upbeat recent checks with ad agencies. Lee thinks that Meta could grow the top line by double-digits in the second half.
On the advertising front, investors will be watching for both updates on the company’s efforts to use AI and other techniques to improve ad targeting. They’ll also be looking for an update on Meta’s progress with monetizing Reels, the company’s TikTok-esque video service which is available on both Facebook and Instagram.
The Street also awaits some clarity from Meta on how it plans to monetize and go to market with its growing work around generative artificial intelligence. The company has a large language model called Llama, or Large Language Model Meta Artificial Intelligence, which it has released on an open-source basis, but Meta hasn’t announced how it might provide consumers with access to the model itself. One question will be whether the costs of investing in—and servicing—AI models could mute the company’s ongoing push to bring down costs and boost margins.
On Tuesday, NewStreet Research analyst Dan Salmon lifted his rating on Meta from Neutral to Buy and boosted his target price from $285 to $350, based on the potential of Meta’s emerging AI arm.
Another obvious focus will be what the company is doing on the metaverse front—a topic that Meta has been speaking less and less about on recent earnings calls. Not least, this will be the first earnings call since the company’s launch of Threads, Meta’s brand-new Twitter rival. Investors will be seeking updates on both how the company plans to monetize the new service—and when.
Write to Eric J. Savitz at [email protected]
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