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Meta up 20% on Q1 results: ‘don’t trust the post-earnings bounce’

By:
on Apr 27, 2022
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  • Meta Platforms reported its financial results for the first quarter on Wed.
  • Shares of the tech giant shot up roughly 20% in after-hours trading.
  • Ritholtz' Josh Brown warns against trusting the post-earnings bounce.

Meta Platforms Inc shares (NASDAQ: FB) jumped 20% in extended trading on better-than-expected Q1 profit, even as revenue and future guidance missed Street expectations.

Key takeaways from Meta Platforms Q1 results

  • Earned $7.47 billion in the first quarter that translates to $2.72 per share.
  • In the same quarter last year, earnings were $9.5 billion ($3.30 per share).
  • Revenue jumped 7.0% YoY to $27.9 billion, as per the earnings press release.
  • FactSet consensus was for $2.56 of EPS on $28.3 billion in revenue.
  • “Family of Apps” brought in $27.2 billion, up 6.1% year-over-year.
  • Operating margin tanked from 43% to 31% in the recent fiscal quarter.

Ad impressions and advertising revenue was up 15% and 6.1%, respectively, but price per ad sunk 8.0% in the fiscal first quarter. The stock is still down 40% for the year.

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Josh Brown reacts to Meta Platforms’ earnings report

Other notable figures include $695 million in revenue from Reality Labs – the metaverse focused business that includes Oculus headsets. The segment noted just under $3.0 billion in loss from operations.

Meta Platforms repurchased $9.40 billion worth of its stock in Q1 and has another $29.4 billion left under current authorization.

According to Meta Platforms, it saw growth in daily active users across all markets except for Europe due to the ongoing war in Ukraine. It had 2.87 billion DAUs on its apps in Q1, a 6.0% increase from the same quarter last year.

At 1.96 billion DAUs, Facebook climbed 4.0% to override a small decline in the previous quarter. Commenting on the after-hours price action, Josh Brown said on CNBC’s “Closing Bell”:

I don’t love the setup here. I like the fact that stock bounced back rather than violating COVID-level lows. But this thing is still in no man’s land. As we learned, don’t trust the post-earnings bounce, it almost never last. Until it breaks that narrative, I wouldn’t say the coast is clear in this name. It’s a lot of damage and a lot of people trapped in this stock.

Future guidance and Alex Kantrowitz’ remarks

For Q2, Meta forecasts $30 billion in revenue at the top end that fell shy of Street expectations by $700 million. It expects a 3.0% foreign currency headwind this quarter. The tech giant lowered its outlook for total expenses in 2022 to $87 billion to $92 billion.

According to Big Technology’s Alex Kantrowitz, while guidance continues to be a concern, user growth was a positive sign for Meta Platforms. Also on CNBC, he said:

The biggest issue last quarter was they were losing users. If they’re able to grow users, it changes the game for them. You don’t find a way to make a living as a shrinking social network. But revenue guidance is a concern. They are still being hit by Apple and probably inflation and other macro factors.