Investing.com - The third-quarter earnings season is in full gear, with major tech companies like Meta Platforms Inc (NASDAQ:META), Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com Inc (NASDAQ:AMZN) primed to release earnings results this week.
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Meta so far has had a strong year, with a year-to-date gain of over 162%, outdoing its FAANG counterparts and becoming the second-best performing stock in the S&P 500 Index. It is second only to NVIDIA Corporation (NASDAQ:NVDA), which has nearly tripled in value this year, riding the wave of the artificial intelligence boom.
Meta's earnings and guidance for the first and second quarters of 2023 exceeded expectations, but will the trend continue with the company's Q3 report on Wednesday, Oct. 25?
Here's a look at what Wall Street expects from Meta's Q3 report, along with seven key factors to keep an eye on during the earnings report of the company led by Mark Zuckerberg.
The tech sector has seen mixed results this earnings season. Netflix (NASDAQ:NFLX)'s stock soared following its Q3 report as it exceeded streaming subscriber estimates, while Tesla (NASDAQ:TSLA)'s shares took a hit after missing earnings expectations and receiving lukewarm remarks from CEO Elon Musk.
For Meta, the bar is high for Q3. The company will need to justify its remarkable 2023 rally. Meta's Q3 revenue guidance is set between $32 billion and $34.5 billion. Even at the lower end, this would represent a year-on-year increase of 15%. Wall Street expects Meta to report revenues of $33.4 billion for the quarter, which aligns with the midpoint of the guidance and suggests a year-on-year increase of over 20%.
Analysts anticipate Meta will report per-share earnings of $3.57, marking a year-on-year rise of over 117%. Although this growth seems impressive, it stems from a lower baseline in the corresponding period last year.
While headline metrics such as revenues, profits, active users, and average revenue per user will be under scrutiny in Meta's Q3 report, here are seven key factors to closely follow:
- Commentary on the Digital Advertising Market: Any slowdown in the digital advertising market could have implications for Meta and other social media companies, especially given the current global macro environment.
- Ad-Free Version in Europe and Other Geographies: Look out for any comments regarding the proposed paid ad-free tier in Europe and potential plans to expand this to other regions.
- Reels Monetization: Meta might provide an update on the monetization of Reels, its short video format designed to compete with TikTok.
- Impact of AI on Meta’s Earnings: As AI is seen as a key driver in the short term, management's commentary on the AI opportunity will be of interest.
- Q4 Revenue Guidance: Meta's Q4 guidance will be crucial and could influence the stock's post-earnings price action.
- What’s Next for Meta After the “Year of Efficiency”: The company might provide insights on what could drive its 2024 performance.
- Reality Labs Losses: Commentary on the Reality Labs segment, including the 2024 operating loss guidance and long-term trajectory, will be of interest.
Despite the rally in Meta's stock, Wall Street analysts predict further gains for the company, with a mean target price of $366.08 implying a 16% increase over current prices.
Analysts are likely to further raise the stock's target price following this week's Q3 results if the company can impress with its Q3 earnings and Q4 outlook.