Meta Platforms (META 0.43%) stock has been on a consistent march higher for almost all of 2023. Shares of the social media giant have more than doubled since early January, trouncing the 30% rally in the Nasdaq Composite index and putting shareholders closer to the all-time highs they saw back in late 2021.
That rally will be tested in a few weeks when Meta Platforms announces its fiscal Q2 earnings results. But in preparation for that report, let's take a look at a few characteristics of this stock that many investors may not know.
1. Stabilizing trends
The best news out of Meta Platforms' late April quarterly announcement was that growth rates appear to have stabilized following a tough period for the business. Sales rose 3% through late March compared to a 1% decline in the full 2022 fiscal year.
Meta Platforms saw a modest uptick in user growth, too, with monthly active user gains accelerating to 5% from 4% in the prior quarter. "We had a good quarter and our community continues to grow," CEO Mark Zuckerberg said in a press release.
2. Cutting costs
One of management's biggest priorities today is getting its costs back in line with the company's slower growth rate. Like many tech giants, Meta hit the accelerator button on infrastructure projects in late 2021 as engagement and earnings soared. The subsequent slowdown arrived just as this spending peaked, leading to a sharp drop in profitability.
META Operating Margin (TTM) data by YCharts
Yet the company still boasts impressive margins and an enviable cash position. Operating income last quarter was $7.2 billion, or 25% of sales, compared to $8.5 billion, or 31% of sales a year ago. Meta is sitting on over $37 billion of cash as of late March, too. Executives are aiming to further improve efficiency over the next few quarters thanks to recent layoffs and spending cuts in lower-priority growth arenas.
3. High expectations
Wall Street has high expectations for the upcoming earnings report slated for late July. Meta should post sales of about $31 billion, or 8% growth overall, translating to a second straight quarter of accelerating gains. Wall Street pros, on average, are looking for earnings to improve to $2.89 per share from $2.46 per share a year earlier.
One key factor to watch in that report is management's comments about the rest of 2023. Executives back in April said they saw encouraging metrics on growth and engagement and were aggressively spending in areas like artificial intelligence, the advertising platform, and its reels program. If the company noticed further improvements in areas like cost cuts and sales, then it might upgrade its short-term forecast.
Wall Street is clearly expecting faster sales growth to meet with a lower expense burden, pushing annual earnings back toward record-high levels. But it might be a few quarters before this full rebound seems assured. In the meantime, smart investors can count on this stock remaining volatile while operating trends stabilize.
