Meta shares up 12% on Q1 earnings: is there upside left in this stock?

Shares of Meta Platforms Inc (NASDAQ: META) went up 12% to a year-to-date high in extended trading after the tech behemoth reported a great start to its “year of efficiency”.

Meta shares up on encouraging guidance

More importantly, the Nasdaq-listed firm issued upbeat guidance for its current quarter. Meta sees revenue in the range of $29.5 billion to $32 billion suggesting accelerated growth in revenue moving forward.  

In comparison, analysts had called for $29.45 billion. Reacting to the earnings print on Yahoo Finance Live, Jefferies’ Brent Thill said:

Checks we have with advertisers is that they have lapped the iOS changes. They’re seeing better ROI on Instagram in particular. So, there are many things that are going right, but common theme is that tech is stronger than most people think.

Notable figures in Meta Q1 earnings

• Earned $5.71 billion versus the year-ago $7.47 billion
• Per-share earnings also declined from $2.72 to $2.20
• Revenue climbed nearly 3.0% YoY to $28.65 billion
• Consensus was $2.02 a share on $27.7 billion revenue
• DAUs across family of apps went up 4.0% 3.02 billion

How is Meta positioned in AI?

Average revenue per user printed at $9.62 – beating the consensus by a healthy 32 cents. According to the Jefferies analyst:

I don’t think advertisers are spending money like crazy. What’s happening is Meta has improved its ROI. They’ve gained share back. Reels has gotten more attention. We’ve seen their new advertising tools announced last year.

Reality Labs – the company’s metaverse focused business generated $339 million of sales in the recently concluded quarter and Thill is convinced that Meta shares are extremely well positioned to capitalise on the ongoing AI mania.  

Is it worth buying Meta stock?

Another round of layoffs that Meta Platforms announced in March is expected to cost about $1.0 billion in total. Just over half of it was realised in Q1, as per the earnings press release. Discussing the possibility of further job cuts, Thill said:

I don’t think they’re all behind. What they’re learning is they can do this and it’s actually good for morale and shareholder value and employee value over time.

Year-to-date, Meta shares are now up nearly 90%. Still, Jefferies’ Thill said it’s not a very expensive stock per se. His $250 price target signals a possibility of another 8.0% gain from here that the analyst expects will unlock as revenue growth continues to pick up.