Zuckerberg built great efficiency that will lead to near-term strength in Meta shares, KeyBanc analyst Justin Patterson noted.
The analyst noted that fourth-quarter revenue of $32.2 billion exceeded consensus and KeyBanc estimates, and that earnings per share, at US$1.76, fell short of expectations.
The daily active user count of 2 billion surpassed the consensus of 1.98 billion, it added. The increase in the metric and the rise in Reels likely suggest that capex is leaning toward “Family of Apps,” while Reality Labs is a multi-year journey, he noted.
Among the encouraging takeaways from Meta’s earnings report and management commentary are “significantly” reduced capital and operating expenses, reflecting a more cost-effective data center architecture for AI and non-AI workloads, Patterson said. He also noted that management signaled some moderation in capital intensity in future periods.
Citing expectations of a higher user base, modestly better average revenue per user, and expense reductions, Patterson raised his 2023 and 2024 revenue estimates for Meta by 1% each and EPS estimates by 16 and 13%. , respectively.
Although encouraged by the financial discipline, the analyst said he is wary of challenges in returning to a roughly 15% annual growth profile. These challenges include time spent, privacy, and the regulatory environment.
The analyst noted that Zuckerberg’s comment suggests a significant change in Meta’s culture with fewer levels of management and this will likely allow faster decision making and lower operating expenses. However, he indicated that rapid changes may risk upsetting morale.
Source: Ambito
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