What happened
Shares of Meta Platforms (META 0.11%) were up 7% as of 10:42 a.m. ET on Thursday after reporting better-than-expected financial results in the second quarter. Revenue accelerated to 11% year over year, and management's guidance points to more growth in the next quarter.
So what
The social media leader has completed an impressive turnaround in under a year, which has sent the stock up 164% in 2023. Better user monetization and higher user engagement, especially in the company's new Threads platform, are boosting sentiment in the stock.
The annual revenue run rate in Reels is now over $10 billion, over triple the size from late 2022. Artificial intelligence (AI)-recommended content also drove a 7% increase in time spent on Facebook, which is great for advertising revenue.
Moreover, CEO Mark Zuckerberg has steered the company to invest in growth initiatives, including Threads and AI infrastructure, without sacrificing bottom-line performance. Earnings per share grew 21% year over year in the quarter.
Now what
When Meta stock sold off to below $100 last year, it was never going anywhere. With over 3 billion people using its family of apps, it is still an advertising magnet. But it's also showing that it can keep its foot on the gas in terms of investing in long-term opportunities like the metaverse, while delivering revenue and earnings growth in the near term.
Meta's third-quarter guidance points to revenue growth between 15% to 24% year over year. That is more than enough growth to support the stock's current forward price-to-earnings ratio of 27, which explains why the stock is still moving higher after a sharp rebound this year.
