Meta Stock Plunges: Facebook’s Parent Company Misses Expectations, AI Investments Increase.
Meta stock took a dive late Wednesday because the results of Facebook’s parent company’s first quarter apparently didn’t meet sky-high expectations. While the company fell short of consensus expectations for both sales and earnings, officials from Meta Platforms (formerly known as Facebook) forecasted lower-than-expected sales for the current quarter.
Meanwhile, in its efforts to lead in Narrative Artificial Intelligence, Meta is increasing its investment in infrastructure to support the “AI Road Map.” All of this contributed to a drop of more than 16% in the company’s shares in after-hours trading today.
Despite Meta securing approval for its first-quarter results above estimates, there was a harsh reaction. A press release states that on sales of.46 billion, it earned.71 per share for the quarter that ended in March. On sales of.14 billion, analysts had predicted earnings per share of.32. Year-over-year, sales climbed by 27%, but profits shot up by an astounding 114%.
Guidance for Meta’s second quarter
Negative reactions to Meta’s current quarter estimates could be inspired by the company’s guidance for sales ranging between .5 billion and billion, or approximately .75 billion at midpoint. According to FactSet, this was lower than the .25 billion sales estimated for the quarter ending June.
Compared to sales growth of 27%, 24.7%, and 23.2% in its previous three quarters, the midpoint guidance for Meta’s second quarter represents an approximately 18% year-over-year revenue growth. Analysts predict that Meta will develop more slowly this year due to difficult year-over-year comparisons.
Meta expects capital expenditure to be between billion and billion this year, expanding its previous range of billion to billion. Meta hopes total expenses will fall between billion and billion for the year, exceeding the previous range of billion to billion.
On Wednesday, in a client note, analysts at Jefferies, led by Brent Thill, wrote that “a shortfall in Q2 revenue guidance and an increase in total expenses and capital expenditure guidance could impact the stock.”
During a call with analysts on Wednesday, CEO Mark Zuckerberg highlighted that the company had released updates for its Meta.AI chatbots and LaMDA large language model last week.
Zuckerberg expressed, “The progress our teams have made serves as yet another significant marker, demonstrating our capacity to establish the fundamental framework for cutting-edge AI models and services globally.” “And it gives me confidence that we should be investing even more in building increasingly sophisticated models and services at scale in the coming years.”
Stock promise decline; Meta dives, leads 5 major earners
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Meta Stock: Technical Rating
Before earnings on Wednesday, Meta closed down half a percent at 493.50. Prior to the hours-long downturn, shares were up less than 40% for the year and had risen 138% in the last 12 months. Speaking of its earnings, Meta stock trailed only Nvidia (NVDA) in the “Magnificent Seven” stocks in 2024, which helped power the stock market rally in 2023.
According to the IBBD stock checkup report, Meta stock had an ideal IBBD composite rating of 99. The score combines five different proprietary ratings into one rating. The composite rating for the top growth stocks is 90 or better.
Furthermore, Meta’s IBBD Relative Strength Rating was 96 out of 99.”
The Economic Times:https://economictimes.indiatimes.com/markets/stocks/news/meta-shares-sink-on-higher-ai-spending-light-revenue-forecast/articleshow/109578323.cms?from=mdr