Facebook parent Meta Platforms maintains bullish sentiment following 1Q earnings beat, analysts say

Sentiment remains bullish for Meta Platforms Inc (NASDAQ:FB) as its focuses on making 2023 a year of efficiency for the company, including slimming down its workforce and increasing expenditure on augmented reality (AR) platform Reality Labs, according to TickMill Group market analyst James Harte.

The owner of social network and messaging services Facebook, Instagram and WhatsApp broke a three-quarter earnings losing streak with the release of its 1Q 2023 financials on Wednesday, Harte said in a note, adding that the breakdown of the numbers “is encouraging for shareholders.”

In terms of headline numbers, Meta posted 1Q earnings per share of $2.20, beating expectations for a $2.02 result, Harte noted. On revenues, it posted $28.6 billion, well above the $27.7 billion the market was looking for. 

Monthly active users were in line with estimates at 2.99 billion while average revenue per user was seen much higher at $9.62 versus the $9.30 that was expected.

“As with Alphabet and Microsoft, traders were keen to hear about the company’s AI and AR business,” Harte said. 

“Reality Labs, which is responsible for developing Meta’s augmented reality products for the metaverse, recorded a $3.99 billion operating loss,” he added. “Additionally, CEO Mark Zuckerberg said this figure will increase this year as the company pumps more investment into that sector.”

Signs of recovery in its advertising business helped to dispel concerns about the continued relevance of its platforms, commented AJ Bell investment director Russ Mould.

“This, plus the greater efficiency pursued by the business in recent months, is clearly helping to win the market over, although … Zuckerburg’s continued insistence on pursuing his metaverse vision will ring in the ears of some investors like tinnitus.

“Meta also notably flagged its own developments on AI as the tech giants compete for their share of real estate in this nascent market.”

Meta’s shares were up 12% at $209.40 in pre-market trade on Thursday.

Contact the author at stephen.gunnion@proactiveinvestors.com