When Meta Platforms Inc. releases its fourth-quarter results, there are several key factors that will shape the narrative - a rebound in advertising, the specter of regulation, and the potential of AI. Industry analysts are optimistic about the company's prospects and have raised their price targets accordingly.
According to Jefferies analyst Brent Thill, Meta is "Firing on All Cylinders." Thill has increased his price target for Meta shares to $455, emphasizing that recent digital ad checks have been incredibly positive. This is the most favorable assessment seen in several years.
Similarly, Seaport Research Partners analyst Aaron Kessler has raised his price target to $435 from $390. Kessler points to strong ad growth and outlook, an updated perspective on 2024 operating expenses, the impact of regulation on content for teenagers, and the expansion of Meta's business through AI initiatives. Meta plans to increase spending on Reality Labs next year as they continue to develop their virtual-reality and augmented-reality offerings.
The immediate future also looks promising, as predicted by Wells Fargo Securities analyst Ken Gawrelski. He forecasts first-quarter revenue between $33 billion and $35 billion, slightly higher than the $33.9 billion expectation from analysts polled by FactSet.
Evercore ISI analyst Mark Mahaney is optimistic about advertising revenue, predicting it to be $38.9 billion, which is 2% higher than the Street's model. Additionally, he expects monthly active users to increase by 2% to reach 3.03 billion.
While ads and AI serve as twin revenue generators and create an enticing storyline, there is a challenging federal regulatory climate to navigate. The Federal Trade Commission is scrutinizing AI partnerships and investments - and another hearing on Capitol Hill is scheduled. These actions have prompted concerns among industry experts.
In fact, the Senate Judiciary Committee recently held a hearing where Meta's CEO Mark Zuckerberg, along with CEOs from Snap Inc., TikTok, X, and Discord were questioned about the safety of their products for children. This ongoing regulatory landscape adds another layer of complexity to Meta's future.
Analysts polled by FactSet are anticipating earnings of $4.83 per share on sales of $39.1 billion.
Meta Platforms Inc. faces both opportunities and challenges as it moves forward. With positive indications in advertising, growth prospects in AI, and ongoing regulatory scrutiny, the company's performance in the fourth quarter will provide important insights into its trajectory.
