Facebook owner Meta slumps as ad sales, spending outlook cloud impressive earnings beat

Meta Platforms  (META) - Get Free Report shares slumped lower in pre-market trading after the social media giant cautioned that near-term ad spending could be affected by global macro conditions, while detailing 2024 spending plans that topped Wall Street forecasts. 

The outlook offset an otherwise impressive third quarter earnings report, which showed the Facebook owner post a bottom line of $4.39 per share, a level that was nearly double last year's tally and crushed Street forecasts. Group revenues were up 23.2%, the best growth rate in two years, to $34.15 billion while monthly and daily active users on it's 'Family of Apps', including WhatsApp, Facebook and Instagram, rose 7% from last year.

Looking into the current quarter, Meta said it sees revenues in the region of $36.5 billion to $40 billion, a range that topped the Street forecast of $38 billion, but noted that the current conflict in the middle east, as well as weakening growth prospects in major economies around the world, could affect that outlook.

Meta also said that while it's trimming its near-term capital spending plans, it's also looking to grow headcount 'significantly' next year, and forecast overall capex in the region of $94 billion to $99 billion. 

The group also said Reality Labs, the division which houses the group's metaverse ambitions, to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and our investments to further scale our ecosystem."

"While encouraging, we believe investors are viewing the wide range for 4Q revenue guidance as a near-term sign of caution," said KeyBanc Capital Markets analyst Justin Patterson, who carries an 'overweight' rating on the stock and lifted his price target by $24, to $380 per share, following last night's earnings.

"CEO Mark Zuckerberg stated that Meta is continuing to focus on operating efficiency, and will be deprioritizing non-AI projects to shift resources toward AI," he added. "While commentary on a hiring backlog may have made some nervous about potential opex acceleration, we view the core message as clear: Meta plans to grow headcount at a much slower rate going forward."

Meta Platforms shares were marked 2.4% lower in pre-mar following last night's earnings release to indicate an opening bell price of $292.51 each.

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