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Meta Platforms Earnings: What to Watch

By Daniel Sparks – Jan 12, 2022 at 10:30AM

Key Points

  • Management guided for significantly slower growth in Q4 than in Q3.
  • Meta Platforms is expected to be negatively affected by Apple's recent changes to ad tracking and measurement on iOS.
  • Given the stock's conservative valuation, it would be good to see a high level of share repurchases from the company during Q4.

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Can results come in strong enough to pull the stock out of the doldrums?

With Meta Platforms(META 0.85%) stock down more than 12% since the beginning of September, investors in the Facebook parent company will be hoping it can surprise to the upside when it reports its fourth-quarter results in a few weeks. Shares of the social media specialist have been beaten down, along with a lot of other growth tech stocks.

Ahead of Meta Platforms' fourth-quarter earnings report on Feb. 2,  here's a preview of some of the key metrics investors will want to watch, including revenue growth, user growth, and share repurchases.

Meta Platforms CEO Mark Zuckerberg discusses the company's 10-year roadmap at F8 2018.

Meta Platforms founder and CEO Mark Zuckerberg.

Slowing revenue growth

Facebook's revenue growth slowed in Q3 as the company faced a tougher year-ago comparison than it did in Q2 and as recent changes to ad tracking and measurement on Apple's iOS negatively affected the company. Revenue increased 35% year over year in Q3, down from 56% growth just three months earlier. 

Looking to Q4, management expects this deceleration to continue. The company guided for fourth-quarter revenue to be between $31.5 billion and $34 billion. The high end of this guidance range represents 21% revenue growth.

"Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple's iOS 14 changes, and macroeconomic and COVID-related factors," explained Facebook's chief financial officer in the company's fourth-quarter earnings call.

Analysts, on average, expect revenue for the period to be $33.4 billion. 

User growth

Facebook continues to consistently grow its user base nicely. In the company's third quarter, total unique monthly users across the company's family of apps (Facebook, Instagram, Messenger, and WhatsApp) rose 6% year over year. Unique daily active users increased 11% year over year.

Meta Platforms management said in its most recent quarterly earnings call that its TikTok-like Reels video product has been a key growth driver for engagement on its platform. If Reels' momentum persisted, it wouldn't be surprising to see a slight uptick in Meta Platforms' fourth-quarter user growth rates.

"Reels is already the primary driver of engagement profiles," explained Meta Platforms CEO Mark Zuckerberg in the company's third-quarter earnings call. "It's incredibly entertaining, and I think that there is a huge amount of potential ahead. We expect this to continue growing and I am optimistic that Reels will be as important for our products as Stories is."

Share repurchases

Another interesting metric to watch will be the company's reported share repurchases. With the stock dipping in Q4, it would make sense for the company to be more aggressive in repurchasing its shares than it was in Q3.

In Q3, Facebook repurchased over $14 billion worth of its shares. But management announced a $50 billion increase to its share repurchase authorization when it reported its third-quarter results, giving the company capital at the ready for an opportunistic buyback. Specifically, it would be nice to see the company act aggressively on the stock's conservative valuation and buy back $15 billion-plus worth of its own stock during the period.

Investors can tune in to Facebook's fourth-quarter results when they are released after market close on Wednesday, Feb. 2.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks owns Apple. His clients may own shares of the company. The Motley Fool owns and recommends Apple and Meta Platforms. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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