US earnings preview: Meta Q1, 2023

Key dates

Meta is scheduled to report its first quarter (Q1) earnings after the market closes on Wednesday, the 26th of April, 2023.

Company profile

Last quarter, Meta reported a revenue beat of $32.17 billion vs $31.53 expected and announced a $40 billion share buyback sending its shares soaring.

Restructuring charges for its Family of Apps (FoA) segment and Reality Labs (RL) unit of $3.76 billion and $440 million, respectively, made for a difficult comparison at an EPS level. However, excluding these charges, Meta’s operating margin would have been 13 percentage points higher, and its diluted EPS would have been $1.24 higher for Q4.

The company reported the following key numbers.

• Facebook daily active users (DAUs) – DAUs were 2.00 billion on average for December 2022, an increase of 4% 1 year-over-year.
• Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of December 31, 2022, an increase of 2% year-over-year
• Revenue – Revenue was $32.17 billion and $116.61 billion, a decrease of 4% and 1% year-over-year for the fourth quarter and full year of 2022, respectively.

“Our community continues to grow, and I'm pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives," said Mark Zuckerberg, Meta founder and CEO.

What to expect

During its Q4 earnings report, Meta said it expected Q1 2023 total revenue to be in the range of $26-28.5 billion. It said that 2023 would be the “ 'Year of Efficiency' and we're focused on becoming a stronger and more nimble organization".

The company also said that it expected total expenses in 2023 to be in a range of $89-95 billion - less than previously forecast due to “slower anticipated growth in payroll expenses and cost of revenue".

The forecast reduction in expenses alleviated concerns that the company’s massive investment in building the metaverse would continue to blow out costs. Its attention to costs saw the company announce another round of job cuts this week, estimated to be around 10,000 heads on top of 11,000 departures announced in November.

Key financials: summary

• Revenue: $27.6bn vs $32.2bn in Q4 2022
• Diluted EPS: $2.00 vs $1.76c in Q4 2022

Meta sales revenue chart

Key data to watch for

• While the company’s focus on controlling expenses has met with shareholder approval and will boost the company’s bottom line, there are concerns that softer advertiser demand, partly from the recent banking crisis, will weigh
• There will be interest to see if Meta’s improved targeting using first-party data will help improve ad pricing
• Comments on the Reality Labs segment will also attract attention as it so far has been immune from recent cost-cutting measures

Meta shares technical analysis

The Meta share price fell 65% in 2022 as soaring interest rates sent tech stocks into a tailspin, as Meta spent a large amount of revenue on building its metaverse and Apple’s privacy update limited ad targeting. The stock finally found a low in late October 2022 at $88.09.

Meta weekly chart

From the $88.09 low, the Meta share price has rallied over 150%. However, it still remains 45% below its bull market high of $384.33.

The rally from the $88.09 low appears corrective and is eyeing the resistance coming from the 200-week moving average at $235. Sellers would be expected to emerge in this region for a pullback towards support at $175/165.00.

Meta daily chart

1. TradingView: the figures stated are as of April 21, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

Summary

Meta is scheduled to report its first quarter (Q1) earnings after the market closes on Wednesday, the 26th of April, 2023.

The technical picture suggests that the rally from 2022 $88.09 low is corrective and will likely be capped at around $235 before a push lower towards $175/165.00.