Shares of Facebook-parent Meta Platforms soared Thursday, even though the social media giant turned in a first-quarter earnings report that fell short on revenue and outlook. FB stock made a double-digit surge as Wall Street was encouraged by what the company had to say.
Formerly called Facebook, Meta reported the quarterly results late Wednesday. Revenue of $27.9 billion missed estimates of $28.3 billion. Meta also expects second-quarter revenue in the range of $28 billion to $30 billion. The midpoint of $29 billion is below analyst estimates of $30 billion.
Adjusted income of $2.72 a share topped expectations of $2.56.
FB stock catapulted 17.6% to close at 205.73 on the stock market today.
Jefferies analyst Brent Thill maintained a buy rating on FB stock and a price target of 330.
He said Facebook would have beaten revenue estimates were it not for macroeconomic conditions and the Russia-Ukraine conflict. And user growth would have been higher were it not for the decline in Russian users.
Another surprise in the earnings report was the $3 billion decrease in total expenses for the year, to a range of $87 billion to $92 billion.
FB Stock: A Focus On Growing Profitability
"We were particularly encouraged to hear that management is focused on 'growing overall profitability' while still funding growth in Reality Labs," Thill wrote in a note to clients.
However, "There are numerous uncertainties that could impact 2022 revenue growth," he said.
Baird analyst Colin Sebastian lowered his price target on FB stock to 275 from 325 but maintained a rating of outperform.
Meta, in its conference call with analysts, cited the ongoing negative impact from Apple privacy changes, weaker e-commerce growth, a pullback in spending after Russia's invasion of Ukraine, and negative macroeconomic trends.
But what encouraged analysts was that Meta topped estimates for user growth.
Short-Form Video Moving The Needle
Also, Sebastian said Meta's short-form video platform, called Reels, "is beginning to move the needle, and helping to combat competitive headwinds from TikTok. Overall, video accounts for about 50% of the time spent on Facebook.
"Reels monetization could be a catalyst for shares if it ramps meaningfully later this year," Sebastian said.
"Facebook's tone on the call suggested the 'worst' may be behind Meta, with progress in mitigating both revenue and competitive headwinds," he said.
FBN Securities analyst Shebly Seyrafi maintained an outperform rating on Facebook stock and lowered his price target to 270, from 300.
In the quarterly report, Meta said revenue rose 7% from the year-ago period. Daily active users climbed 4% to 1.96 billion, meeting estimates. And monthly active users climbed 3% to 2.94 billion.
Shifting From Social Network To Metaverse
Meta is undergoing a major and costly shift from social networking to the metaverse. It faces several other challenges.
For example, it continues to see revenue declines due to Apple changing its iPhone operating system to reduce ad tracking. It also faces increased competition from TikTok and remains under pressure over allegations of antitrust from Congress.
At the same time, digital ad spending decisions remain in flux with many small and midsize businesses considering new channels away from Meta for the first time.
In mid-April, two analysts lowered their price target on FB stock, raising concerns over the Russia-Ukraine conflict and its impact on European economies, as well as shifts in digital advertising.
FB stock is down about 40% this year.
FB Stock: Confident In Long-Term Opportunities
"We made progress this quarter across a number of key company priorities, and we remain confident in the long‑term opportunities and growth that our product roadmap will unlock," said Chief Executive Mark Zuckerberg, in written remarks with the Meta earnings release.
"More people use our services today than ever before, and I'm proud of how our products are serving people around the world," he said.
Meta expects 2022 expenses in the range of $87 billion to $92 billion. That's below its previous outlook of $90 billion to $95 billion.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
