Nicole Webb remains a ‘cautious shareholder’ despite Meta’s strong Q3

Meta Platforms Inc (NASDAQ: META) is trending up in extended hours after reporting market-beating results for its fiscal third quarter.

Meta issued solid guidance for Q4

Shares are up also because the guidance was roughly in line with Street estimates as well.

Meta now forecasts its revenue to fall between $36.5 billion and $40 billion in its current financial quarter versus analysts at $38.7 billion. Still, Nicole Webb of Wealth Enhancement Group said today:

I would say I’m a cautious shareholder. They have a history of not walking the tight rope well in terms of innovation while remaining disciplined in spend.

She’s particularly cautious because a bipartisan group of 33 attorney generals filed a complaint against Meta Platforms earlier this week (find out more).

There was more to like in Meta’s earnings release

Meta Platforms expects currency to be a two percentage point tailwind in its Q4. Also a positive was the operating margin that roughly doubled year-on-year to 40% in the third quarter as the tech behemoth continued to cut costs.

The multinational concluded its Q3 with headcount down 24% that contributed to a 7.0% decline in overall expenses. But on CNBC’s “Closing Bell”, Nicole Webb added:

If we’re going to think about deploying cash outside of treasuries today, is it into Meta Platforms? That’s where our firm is saying no.

Meta now sees capital spending to be capped at $29 billion this year versus its previous guidance for up to $30 billion. It does, however, expects $30 billion to $35 billion of CAPEX in 2024.

Gene Munster shares his view on Meta

Other notable figures in the earnings press release include a 31% increase in ad impressions. Price per ad, however, was down 6.0% on average. According to Gene Munster of Deepwater Asset Management:

The reason to own Meta is they have a lock in terms of reach that no other advertiser can get. And they’re doing it in a more profitable way than they did three years ago. On top of this, valuation is attractive.

Reels is now net neutral as well to total ad revenue as per CEO Mark Zuckerberg. Meta expects short videos to be a material catalyst for revenue growth moving forward.

Threads – a messaging platform that it recently launched to compete with X now has a bit under 100 million MAUs.

Meta Platforms’ Q3 financial highlights

• Earned $11.6 billion versus the year-ago $4.4 billion
• Per-share earnings also climbed from $1.64 to $4.39
• Revenue jumped 23% year-on-year to $34.2 billion
• Consensus was $3.64 a share on $33.6 billion revenue
• Ended the quarter with 3.14 billion DAUs – up 7.0%
• $11.23 of ARPU in Q3 was also better than expected

Reality Labs lost another $3.74 billion in the third quarter. The metaverse unit has lost a total of $11.47 billion and Meta Platforms expects that loss to widen in 2024. Munster added:

Reality Labs is still a sore point for me. I wish they wouldn’t spent $15 billion. That is absolutely absurd. This just doesn’t make sense.