Meta Platforms: Okay Q3 Results, Terrible Investor Messaging

(Preview) Company Update (META US) (Buy)

Summary

• Meta stock fell 25% after Q3 results to where it was in 2016. We believe this was due to poor messaging and the results were fine.

• Meta's 2.6% ex-currency ad growth was adequate against the macro backdrop, and progress is being made against TikTok and Apple.

• Large cost increases guided for 2023 are largely the result of hires already made, while the large CapEx is not Metaverse-related.

• Meta is in fact keeping headcount flat for the next few quarters and is likely targeting a return to EBIT growth after 2023.

• At $97.94, shares are at 7x 2021 EPS. Simply returning to 2018 earnings, and a 20x P/E would result in an 88% gain (21.9% annualized). Buy.

Introduction

Meta Platforms, Inc. (formerly Facebook) shares fell 25% today after reporting Q3 2022 results overnight. At $97.94, META stock is now back to a level last seen in 2016.

Meta shares have now lost 43% since we initiated our Buy rating in March 2019 and 75% since its peak last September.

We see Meta's share price collapse today as …