Meta Platforms rallies almost 20% after earnings

Meta Platforms (META.US) released a Q4 2022 earnings report yesterday after the close of the Wall Street session and it turned out to be mixed. Nevertheless, shares rallied following the release and are trading almost 20% higher in premarket today. Let's take a closer look at Q4 results from Meta Platforms.

Q4 revenue and user numbers expectations

Meta Platforms reported Q4 2022 revenue at $32.17 billion, which turned out to be better-than-expected. Revenue beat was driven by the Family of Apps segment, which includes Meta's ad business. Ad revenue came in at $31.25 billion, compared to $30.86 billion, and was 4.2% YoY lower. Reality Labs segment, which hosts Metaverse business, has once again generated a massive operating loss, this time amounting to $4.2 billion. Meanwhile, operating income in the company's core Family of Apps segment dropped 30% YoY. This has led to operating margin dropping to around 20% in Q4 2022. While those results aren't too encouraging, the company managed to beat active users estimates - both daily and monthly.

Revenue: $32.17 billion vs $31.65 billion expected (-4.5% YoY)

• Reality Labs: $727 million vs $652.4 million expected (-17% YoY)
• Family of Apps: $31.44 billion vs $30.81 billion expected (-4.1% YoY)
• Other revenue: $184 million vs $188 million expected (+19% YoY)

Operating profit: $6.4 billion

• Reality Labs: -$4.28 billion 
• Family of Apps: +$10.68 billion (-33% YoY)

Operating Margin: 20%

Facebook daily active users: 2.00 billion vs 1.98 billion

Facebook monthly active users: 2.96 billion vs 2.98 billion

EPS: $1.76

Mixed forecasts for Q1 2023 and full-2023

Meta also provided investors with a new set of forecasts. Q1 2023 revenue is expected in the $26-28.5 billion range (between -7% and +2% YoY) and the company noted that it expects a negative impact of FX rates of around 3% YoY in the quarter. This is a rather soft forecast. However, should Meta manage to finish Q1 2023 with a positive sales growth, it would be a welcome development given that revenue growth in Q2, Q3 and Q4 2022 turned out to be negative.

When it comes to full-2023 forecasts, Meta expects total expenses to amount to $89-95 billion. This can be seen as a positive as the company expected expenses to amount to $94-100 billion in its previous forecast. Capital expenditures in 2023 are seen at $30-33 billion. Unlike expenses forecast, this cannot be seen as a positive as previous estimates from the company pointed to $34-37 billion in 2023 CapEx.

Buybacks drive share price higher

While Q4 results and 2023 forecasts from Meta Platforms are mixed, share price of the company rallied following the release. The move can be reasoned with a major announcement from Meta Platforms. Meta announced that it will launch a stock buyback programme worth $40 billion. It looks like it was enough to send shares flying. It should not come as a surprise as it means that demand for Meta shares would increase significantly. Nevertheless, buybacks also show that the company does not see any opportunities to use these funds better.

A look at the chart

As we have already said, Meta Platforms (META.US) is rallying almost 20% in pre market today. Current premarket quotes point to the stock launching today's trading in the $182.70 area. This would mean breaking above the resistance zone ranging below 23.6% retracement of the downward impulse launched in September 2021. However, another resistance zone can be found ranging above $182.50 handle and is marked with local highs and lows from 2022. Nevertheless, the technical picture for the stock looks optimistic with shares closing above the 200-session moving average yesterday for the first time in over a year.

Meta Platforms (META.US) at D1 interval. Source: xStation5