Facebook parent Meta Platforms will publish first quarter earnings later today. Meta stock was trading slightly lower in morning trading, despite positive views from on AI-related announcement the company made at its first-ever LlamaConevent dedicated to generative artificial intelligence on Tuesday.
Shares of the Magnificent Seven tech giant are still down overall for the year. Meta stock has reeled from the uncertainty surrounding President Donald Trump's tariffs policy and a trade war with China. Chinese e-commerce retailers are a major source of advertising revenue for Meta's Facebook and Instagram.
"The ad business broadly is tied to economic growth and, given all the tariff issues and uncertainty, we should expect growth to slow for the next few quarters unless something meaningful changes on tariffs," Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, told Investor's Business Daily in an email.
That will put extra focus on how Chief Executive Mark Zuckerberg describes the current market for Meta and his vision this year for the trillion-dollar tech giant. The company's revenue guidance in particular could dictate how the market responds to Meta's report.
Meta Q1 By The Numbers
Overall, analysts expect Meta to post Q1 earnings of $5.23 per share, up 11% year over year. Sales are projected to rise 13% to $41.3 billion, according to FactSet.
BofA Securities analyst Justin Post wrote Monday that Google's YouTube ad performance and checks with ad-buyers indicate the top-end of Meta's first quarter revenue guidance ($41.8 billion) is "achievable."
Additionally, the timing of Trump's April 2 tariff announcement will likely mean that Meta's first quarter results are less in doubt.
"Q1 was likely another solid quarter for Meta, because the impact of tariffs hadn't yet kicked in," said Debra Aho Williamson, an analyst with Sonata Insights, in a research note Monday. "Q2 will be a different story, as investment from China-based advertisers is likely to plunge."
Wall Street is likely to be more focused on Meta's revenue guidance for the current, June-ending second quarter. The consensus estimates for analysts project Meta will guide for sales of $43.8 billion, representing 12% year-over-year growth.
"We expect some macro conservatism in the 2Q guide and expect an outlook at $40.5 billion to $44.0 billion," Post added in a client note. Post rates Meta stock a buy with a 640 price target.
Meta's Launching AI App
Meta has committed to spending between $60 billion and $65 billion in capital expenditures this year, mostly focused on AI. Analysts don't expect cost cuts there, however.
"We don't expect Meta to pull back much on its capex initiatives given the importance of AI, but see ample leverage potential in Reality Labs where Meta spent roughly $20 billion in 2024 despite only generating $2 billion in revenue," wrote Jefferies analyst Brent Thill in a client note Monday. Reality Labs is the division focused on Meta's metaverse efforts, including headsets.
At its LlamaCon event Tuesday, Meta revealed a standalone app for its Meta AI chatbot. That could allow Meta to compete more directly with OpenAI's ChatGPT app. It will include a social to allow users to show friends how they are using AI..
"In our view, one of its most important features is the ability to sync existing Meta accounts like Instagram and Facebook to the Meta AI app and allow access to years of data," William Blair analyst Ralph Shackart wrote in a client note Tuesday.
Meta also launched an application programming interface (API) to allow developers to more easily integrate its Llama AI models into their products. Thill, at Jefferies, saw the move as a "big step forward" for Meta monetizing its AI efforts.
"Previously, Llama was accessible to developers via APIs provided by cloud service providers like AWS (Amazon Web Services) and (Microsoft) Azure, with which Meta had revenue agreements," Thill wrote in a Tuesday client note. "By announcing the Llama API, Meta positions itself to directly monetize Llama, marking its first foray into offering its own cloud infrastructure/platform for building and running Llama apps."
Meta Stock Retakes 21-Day Line
Meta stock slipped more than 2% to 540.20 in recent premarket action on the stock market today. Shares closed slightly higher on Tuesday and have gained more than 13% since the start of last week, helped by hopes that the trade war with China will ease. The gains pushed Meta stock back above its 21-day moving average though shares remain below its 50-day line.
Meta stock has shed 5% year to date, compared with its 194% surge in 2023 and 65% gain last year. Meta has an IBD Composite Rating of 88 out of a best possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
