Investors cautious ahead of Facebook parent Meta’s Q1 earnings results

• Meta Platforms reports Q1 results on April 26.
• Investors are playing it cautiously, with shares down 4% in the past week. The stock has rallied 75% year-to-date. 
• Meta recently implemented its second wave of layoffs as it targets efficiency.  

The big tech earnings parade continues, with Facebook parent Meta Platforms set to report its quarterly results on April 26. Investors are treading carefully, with shares down 4% in the past week or so. But investors can’t complain. Year-to-date, Meta shares have participated in the big-tech rally and are up 75%. 

While Big Tech stocks started off the year strong, the sector could be in for some turbulence in the near term, depending on how profit margins shape up. For Meta shares to continue on the same bullish path, investors will need a good reason to reward the stock. Meta shares are currently trading at 16x EPS. 

Economic  Headwinds

Meta’s top and bottom lines are widely expected to fall below last year’s results due to the economic headwinds. The company is targeting Q1 revenue in the range of $26 billion-$28.5 billion compared to year-ago results of $27.9 billion. EPS estimates are $1.96 vs. $2.72 in the year-ago period. All eyes will also be on Facebook’s daily active users, which covered at 2 billion at last check.

Bloomberg predicts that Meta’s revenue will be down 1% vs. year-ago results as the company embarks on what’s expected to be a “slow recovery.” 

Meanwhile, Meta is expected to benefit from trends such as AI, which it has implemented in its brands including Facebook and Instagram, resulting in more targeted ads for small businesses. However, Apple threw a wrench into the formula by making it harder for social media companies to reach their targeted audience. 

Analysts at Morgan Stanley expect that Meta will experience “more durable multi-year revenue growth.” However, short-term ad revenue is more uncertain. The analysts also find Meta’s “near-term engagement trends” to be positive. 

Meta’s Cost Cuts 

A common theme this earnings season has been cost-cutting amid persistent uncertainty in the economy tied to high inflation, rising interest rates and a looming recession. 

Meta made headlines this month for a wave of layoffs, with 10,000 jobs on the chopping block in the coming months, making this the second wave of layoffs since late last year. Meta’s end game is to become a more efficient operation.