Meta stock sank late Wednesday as the Facebook parent company’s first-quarter results apparently failed to live up to sky-high expectations. While the company beat consensus expectations for both sales and earnings, Meta Platforms (META) executives gave a lighter-than-expected sales forecast for the current quarter.
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Meanwhile, Meta’s push to be a leader in generative artificial intelligence is adding to its costs. The Menlo Park, Calif.-based company raised its guidance for total expenses, citing infrastructure investments needed to supports it “AI road map,” according to the company’s news release. All that contributed up to a more than 16% slide in recent after-hours action on the stock market today.
The harsh response comes despite Meta clearing a high bar for its first-quarter results. The company said in a news release that it earned $4.71 per share on sales of $36.46 billion for the March-ended quarter. On average, analysts projected Meta would post earnings of $4.32 per share on sales of $36.14 billion, according to FactSet. Sales jumped 27% year over year while earnings increased 114%.
Meta Guidance For Q2 2024
The negative response for Meta stock could be driven by its projections for the current quarter. Meta guided for sales between $36.5 billion and $39 billion, or $37.75 billion at the midpoint of its range. That was short of the $38.25 billion in sales for the June-ending quarter that analysts were projecting, according to FactSet.
The midpoint of its range would represent roughly 18% year over year revenue growth for Meta’s second quarter, compared to sales growth of 27%, 24.7% and 23.2% in Meta’s three previous quarters. But analysts anticipated that Meta’s growth rate would slow this year, as the company came up against harder year-over-year comparisons.
But the rising costs may have caught some investors off guard.
Meta now projects capital expenditures between $35 billion and $40 billion this year, increased from the company’s prior range of $30 billion to $37 billion. Meta expects overall expenses for the year to fall between $96 billion and $99 billion, up from a previous given range of $94 billion to $99 billion.
In a client note Wednesday, Jefferies analyst Brent Thill wrote that “lighter than expected Q2 revenue guidance and increases in the total expense and capex guides could weigh on the stock.”
On a call with analysts Wednesday, Chief Executive Mark Zuckerberg highlighted that the company released updates to its Meta.ai chatbot and Llama large language model last week.
“I view the results our teams have achieved here as another key milestone in showing that we have the talent, data and ability to scale infrastructure to build the world’s leading AI models and services,” Zuckerberg said. “And this leads me to believe that we should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world.”
Futures Fall; Meta Dives, Leads 5 Key Earnings Movers
Meta Stock: Technical Ratings
Prior to earnings, Meta fell a half-percent to close at 493.50 in Wednesday trading. Prior to the after-hours slide, shares had gained just under 40% this year and 138% in the past 12 months. Coming into its earnings, Meta stock trailed only Nvidia (NVDA) for the best performance in 2024 among the “Magnificent Seven” stocks that helped power the stock market rally in 2023.
Coming into the report, Meta stock had a perfect IBD Composite Rating of 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.
Further, Meta’s IBD Relative Strength Rating was 96 out of 99.
Meta stock is on several IBD stock lists, including Tech Leaders, IBD 50, Big Cap 20 and the premium IBD Leaderboard list.
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