Meta receives injection of goodwill after surprise advertising jump

(Alliance News) - Meta Platforms shares soared Thursday as a surprise increase in advertising revenue drove better than expected first quarter revenue.

Sophie Lund-Yates at Hargreaves Lansdown said the "injection of goodwill" into the shares came as investors breathe "a sigh of relief at the sight of a growing advertising revenue line."

"Growth is more sluggish than is ideal, but it's ultimately better than expected," she said.

She felt the surprise advertising recovery could suggest consumer behaviour isn’t slowing down as abruptly as thought, helping businesses to up their spending.

The owner of Facebook and Instagram said revenue in the three months to March 31 totalled USD28.65 billion, a 3% increase on last year's USD27.91 billion, and ahead of forecasts of USD27.65 billion.

But net income fell 24% to USD5.71 billion from USD7.47 billion a year prior while diluted earnings per share slipped 19% to USD2.20 from USD2.72. Costs and expenses rose 10% to USD21.42 billion.

Facebook daily active users climbed to 2.04 billion on average for March 2023, an increase of 4% year-over-year while advert impressions across its family of apps were 26% higher year-on-year though the average price per advert was down by 17%.

AJ Bell's Russ Mould said the figures helped to "dispel concerns about the continued relevance of these platforms."

Looking ahead and Meta expects second quarter 2023 total revenue to be in the range of USD29.5 billion to USD32 billion. Analysts had expected a figure of USD29.5 billion.

Lund-Yates suggested further momentum in the second quarter would appear to "draw a line in the sand where its advertising declines are concerned."

"We had a good quarter and our community continues to grow," said Mark Zuckerberg, Meta founder and CEO. "Our AI work is driving good results across our apps and business. We're also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision."

AJ Bell's Mould did caution that CEO Mark Zuckerburg's continued insistence on pursuing his metaverse vision "will ring in the ears of some investors like tinnitus."

But Lund-Yates at Hargreaves Lansdown thinks "Zuckerberg is well aware that his spending habits are being watched very carefully, and any renewed efforts to shift the budget to untested areas won't go down well."

But she pointed out, "it's very hard to penny-pinch your way to the top, leaving Meta walking a very fine line between keeping the lights on and making the future bright enough to excite investors.”

Shares in Meta Platforms were 15% higher at USD239.76 each in New York on Thursday.

By Jeremy Cutler, Alliance News reporter

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