Meta still a top Internet pick at Citi with earnings expectations 'muted'
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Meta Platforms stock (NASDAQ:META) remains one of Citi's top picks in the Internet space going into third-quarter earnings reports, marking a "compelling" risk/reward opportunity at current levels.
Expectations going into the report are "relatively muted" given industry chatter around engagement, social media competition, and monetization, analyst Ronald Josey says: "Meta is one of the most debated names in our coverage universe into 3Q results."
The broader online advertising environment improved during the quarter, Josey says, despite a deteriorating macro environment; with the reined-in expectations, Meta's revenue and profitability are likely to be in line or slightly ahead of expectations.
"That said, we believe overall engagement and MSI (Meaningful Social Interactions) across Reels, Feed, Stories, and Messenger is improving as Meta rebuilds its Discovery engine and weâll be focused on engagement across the platform," Josey says.
And the key focus for Citi in the report is expense guidance for 2023, given the macro uncertainty. After news of a hiring freeze (following on an initiative to cut expenses 10%), the bank is looking for 2023 operating expenditure guidance in the "high $80 to low $90 billion range," vs. City's current projection of $93.8B.
Citi has a Buy rating and a $222 target price, implying 67% upside.
Meta is set to report third-quarter results on Wednesday, Oct. 26, after the closing bell; analyst consensus is for the company to post normalized earnings per share of $1.87 on revenues of $27.48B.
And Wall Street has a Buy rating on average, as do Seeking Alpha authors. Seeking Alpha's Quant Rating system calls Meta a Hold.