Analyst recommends ‘caution’ as Meta stock pops 20% on guidance

Shares of Meta Platforms Inc (NASDAQ: META) surged nearly 20% in extended hours after the tech behemoth issued upbeat sales guidance and increased its share repurchase authorisation by $40 billion.

Meta stock up on number of users

Also a positive was the number of users on Facebook that, for the first time, hit the $2.0 billion mark.

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For Q1, Meta now forecasts its revenue to fall between $26 billion and $28.5 billion – better than $27.1 billion that analysts had anticipated. It also plans on staying on course with layoffs (find out more) and trimming other costs, including on data-center projects.

Consequently, the multinational lowered its guidance for operating expenses to $89 billion to $95 billion and capital expenditures to $30 billion to $33 billion. Reacting to it on Yahoo Finance, Jefferies’ Brent Thill said:

Last quarter, every was like, what on earth are you doing Mr Zuckerberg? Two weeks later, he pulled back the throttle which was at twelve to a nine and now he’s back to a seven on expenses. He’s clearly listening to Wall Street”

Is now a suitable time to buy Meta stock?

Including the after-hours gain, Meta stock is already up 45% year-to-date. Therefore, Thill recommends “caution” for those interested in taking a position here, especially since there still are challenges ahead.

I’d say margins are a concern. I’d be concerned about the magnitude of the [stock] move. Number two, the expense structure still, And number three, we’re not out of the woods on the economy. We’re not out of the woods with ad spend.

On the bright side, though, he’s bullish on “Reels” and is convinced that Meta Platforms is past the headwinds related to the Apple privacy changes.

Meta Platforms’ Q4 earnings snapshot

• Earned $4.65 billion versus the year ago $10.3 billion
• Per-share earnings also tanked from $3.67 to $1.76
• Revenue slid 4.5% year-on-year to $32.17 billion
• Consensus was $2.26 a share on $31.55 billion revenue
• ARPU of $10.86 was also better the Street estimates
• Reality Labs (metaverse unit) lost $4.28 billion in Q4

According to Meta Platforms, layoff and other restructuring costs lowered its per-share earnings this quarter by roughly $1.24, as per the press release. Late last year, though, it had warned that its operating loss attributed to “Reality Labs” will grow significantly in 2023.