What To Expect From Meta Platforms In Q2?

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Meta Platforms (NASDAQ: META) is scheduled to report its fiscal Q2 2023 results on Wednesday, July 26, 2023. We expect the stock to beat the consensus estimates of earnings and revenues. The company outperformed expectations in the last quarter, with revenues increasing by 3% y-o-y to $28.65 billion. The growth was due to growth in advertising revenues. Further, the daily active users (DAUs) and ad impressions delivered across the META Family of Apps rose by 4% and 26% respectively. However, the positive impact was somewhat offset by a 17% drop in the average price per ad. We expect the same trend to continue in Q2.

Our forecast indicates that Meta Platforms’ valuation is $228 per share, which is 28% below the current market price of around $316. Our interactive dashboard analysis on Meta Platforms’ Earnings Preview has more details. 

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(1) Revenues expected to top the consensus

Meta Platforms’ revenues marginally decreased to $116.6 billion in FY 2022. However, it posted a 3% growth in the first quarter of 2023. It was mainly due to an increase in ad impressions and DAUs, despite continued pricing pressure. The advertising demand on the platform has suffered in recent quarters due to tough macroeconomic conditions and limitations on ad targeting due to the iOS privacy update. We expect the Q2 results to be on similar lines. That said, the company is making efforts to diversify its revenue stream. It recently launched a microblogging platform (Threads0) and Meta Verified subscription service. Overall, Meta Platforms’ revenues are estimated to touch $122.35 billion in FY2023.

Trefis estimates Meta Platforms’ fiscal Q2 2023 net revenues to be around $31.59 billion, 2% above the $31.09 billion consensus estimate. 

(2) EPS to beat the consensus estimates

Meta Platforms Q2 2023 adjusted earnings per share (EPS) is expected to be $2.95 per Trefis analysis, 1% above the consensus estimate of $2.91. The company’s adjusted net income decreased by 41% y-o-y in FY 2022. Further, the trend continued in Q1, with net income declining by 24% y-o-y driven by higher costs & expenses. We expect the net income margin to see some improvement in the second quarter. Overall, we estimate an annual GAAP EPS of around $10.02 in FY2023.

(3) Stock price estimate is 28% below the current market price

We arrive at Meta Platforms’ valuation, using a GAAP EPS estimate of around $10.02 and a P/E multiple of just below 23x in fiscal 2023. This translates into a price of $228, which is 28% lower than the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 META Return 10% 163% 175%
 S&P 500 Return 3% 19% 104%
 Trefis Multi-Strategy Portfolio 8% 28% 312%

[1] Month-to-date and year-to-date as of 7/20/2023
[2] Cumulative total returns since the end of 2016

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