Meta Platforms (NASDAQ:META) stock is a head-turner in after-hours trading due to the company’s impressive user growth. Meta Platforms’ first-quarter 2023 earnings results demonstrate that the company is on the right track, and I am bullish on META stock because CEO Mark Zuckerberg’s restructuring plan seems to be having its desired effect.
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You probably know Meta Platforms as the parent company of Facebook and Instagram. However, Zuckerberg also has an ambitious vision for Meta Platforms to advance the metaverse and deploy artificial intelligence (AI) technology. However, it was difficult for the CEO to realize his visions for Meta Platforms in 2022 — when technology companies generally struggled.
Consequently, Meta Platforms’ quarterly financial report has larger implications. It’s an indication of whether tech companies will be able to emerge from the slump of 2022 and thrive in 2023. As it turns out, Meta Platforms had a triumphant Q1, and the company’s investors are, understandably, feeling a sense of relief and victory.
Meta Platforms Embarks on a “Year of Efficiency”
Certainly, Meta Platforms isn’t the only technology company to reduce its headcount in order to cut costs. However, Zuckerberg is categorically declaring 2023 to be the “year of efficiency” as Meta Platforms expects to slash 21,000 jobs. Along with that, Zuckerberg assures that his company is becoming “more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision.” Thus, Meta Platforms anticipates full-year 2023 total expenses of $86 billion to $90 billion, a step down from the $86 billion to $92 billion in spending that the company had modeled in March.
In addition, Meta Platforms reiterated its 2023 capital expenditure (CapEx) forecast of $30 billion to $33 billion. Make no mistake about it: Meta Platforms intends to spend a portion of this money on developing the company’s AI capacities. This is to include Meta Platforms’ “ongoing build out of AI capacity to support ads, Feed and Reels, along with an increased investment in capacity” for its generative AI initiatives.
I’ll admit, however, that Meta Platforms still has room to improve. The company’s first-quarter 2023 total costs and expenses came to $21.42 billion, up 10% year-over-year. On the other hand, this figure includes “restructuring” costs, which I’m assuming includes severance pay for some laid-off workers. Hopefully, Meta Platforms will be able to reduce its expenditures throughout the year in order to bolster its bottom line and satisfy shareholders.
Meta Platform Beats Expectations and Grows User Base
Now, you might wonder whether Meta Platforms could possibly have produced strong revenue and income during a time of reduced spending and layoffs. The good news is that Meta Platforms grew its user count during a challenging time for the U.S. economy and especially for the tech sector. Moreover, the company stunned the critics with results that exceeded Wall Street’s expectations.
What could possibly have caused META stock to jump nearly 12% in after-hours trading? For one thing, Meta Platforms demonstrated across-the-board user growth. Year-over-year, Meta Platforms’ daily active users increased by 4% in March. Also, the company’s monthly active users grew 2% as of March 31, 2023.
This user base expansion undoubtedly helped Meta Platforms deliver more advertisement impressions – and indeed, the company’s first-quarter ad impressions across its Family of Apps rose 26% year-over-year.
Here’s what really impressed the trading community, though: Meta Platforms’ quarterly revenue increased by 3% to $28.65 billion. Insider Intelligence principal analyst Debra Aho Williamson put this into context, explaining, “In this economic environment—and after the disaster that was 2022—3% year over year revenue growth is an accomplishment.” For the current quarter, Meta Platforms expects to generate revenue of $29.5 billion to $32 billion versus the average estimate of $29.5 billion.
Finally, Meta Platforms reported first-quarter diluted earnings per share (EPS) of $2.20, beating the consensus estimate of $2.02. In other words, there are clear reasons for investors to celebrate and bid up META stock now.
Is META Stock a Buy, According to Analysts?
Turning to Wall Street, META is a Moderate Buy based on 39 Buys, seven Holds, and three Sell ratings. The average Meta Platforms stock price target is $236.50, implying 12.9% upside potential.
Conclusion: Should You Consider Meta Platforms Stock?
Sure, Meta Platforms had a tough 2022, but so did most technology companies. Today, Zuckerberg’s cost-cutting efforts seem to be paying off, and Meta Platforms’ AI focus could help to improve the company’s efficiency throughout 2023.
Truly, Meta Platforms proved its harshest critics wrong and triumphed with Street-beating results and impressive user-count growth. With that in mind, even following the after-hours jump in META stock, it still makes sense to consider a long position right now.
