Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) is expected to deliver a third quarter earnings beat amid high expectations, analysts at Bank of America believe.
Meta will report its Q3 earnings after US markets close tonight.
The analysts expect revenue of $40.4 billion and earnings per share of $5.35, above the Street consensus of $40.2 billion and $5.19, respectively.
Strength is expected to be driven by new AI tools and new Customer Relationship Management (CRM) management driving higher return on investment and incremental ad spend; ramping messaging and Reels monetization; and modest political ad spend benefit.
They project 3Q daily active people of 3.32 billion, up 2% quarter-over-quarter, and average revenue per user of $12.06, pointing to Sensor Tower data which suggests “healthy” Instagram time spent and user growth.
“With average number of job openings down quarter-over-quarter, and reported layoffs last week, we think costs for 2024 could be below estimates,” the analysts added.
Other positives from Meta’s Q3 results include commentary indicating Reality Labs hardware cost cuts and optimism on Reality Labs glasses demand.
However, risks include high expectations for a revenue beat, an underwhelming Q4 outlook on tougher comparisons, or commentary suggesting a bigger-than-expected 2025 capex ramp.
“While we expect positive estimate revisions post-print, expectations for a beat and higher estimates are high, and management could try to keep 2025 estimates in check (via commentary on headwinds, investments, or conservatism in 4Q revenue outlook), adding some near-term volatility risk,” the analysts wrote.
Looking ahead to the fourth quarter, they expect Meta to guide revenue in the range of $45 billion to $47.5 billion, up 12% to 18% year-over-year, compared to the Street consensus of $46.3 billion.
“We also think Meta could lower upper end of 2024 expense guide by $1 billion to $96 billion to $98 billion (versus Street at $98.2 billion), though capex could be trending toward higher end of guide at $37 billion to $40 billion,” they wrote.
The bank’s analysts repeated their ‘Buy’ rating on Meta and awarded it a price target of $630.
Meta shares traded hands at about $597 on Wednesday morning ahead of its earnings report.
- Updated with share price movement -