What Happened:
Shares of social network operator Meta Platforms (NASDAQ:META) jumped 21.9% in the afternoon session after the company reported fourth-quarter results with revenue, operating income, and EPS, all exceeding analysts' estimates. These beats were driven by better-than-expected daily active users along with a 21% year-on-year increase in ad impressions. Meta also saw a 2% tailwind in advertising pricing. Commentary across the sector suggests the advertising market is likely to rebound in 2024, partly explaining why Meta had a strong quarter.
Looking ahead, Meta's Q1 2024 revenue guidance topped Wall Street's forecast, while its anticipated full-year 2024 capital expenditures came in slightly higher. The company expects this capex growth to come from investments in servers, including AI and non-AI hardware (you're welcome, Nvidia), and data centers as it ramps up construction for its new data center architecture. These investments will be key for its open-source large language model, Llama, to successfully compete against OpenAI's closed-source ChatGPT.
Perhaps the most interesting part of the quarter was the announcement of a quarterly dividend - the first in the company's history. Stockholders, as of February 22, 2024, are set to receive $0.50 per share per quarter. Overall, this was a really good quarter that should please shareholders.
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What is the market telling us:
Meta's shares are somewhat volatile and over the last year have had 3 moves greater than 5%. But moves this big are very rare even for Meta and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 9 months ago, when the stock gained 12% on the news that the company reported impressive first-quarter results that surpassed analysts' daily active users (DAU), revenue, operating profit, earnings per share (EPS), and free cash flow expectations. Sales climbed in the first three months of the year, snapping a cycle of three straight quarters of revenue drops. Revenue guidance for the next quarter also topped the consensus estimates. Additionally, Meta reduced the outlook for full-year expenses, which showed a focus on cost efficiency that the market applauded.
Meta is up 38.7% since the beginning of the year. Investors who bought $1,000 worth of Meta's shares 5 years ago would now be looking at an investment worth $2,838.
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