Meta shares declined on Thursday, following the unveiling of its strong third-quarter results. Nonetheless, the stock had initially increased in response to the report, up until Susan Li, the company's finance chief, cautioned analysts of the unpredictable nature of the Israel-Hamas conflict. Although this continues to cast uncertainty for Meta, many analysts still maintain a bullish outlook for the firm.
Shares of Meta tumbled more than 2% Thursday, one day following the company's release of impressive third-quarter results but showing some wariness about potential ad weakness due to the ongoing Israel-Hamas war.Meta declared $34.15 billion in revenue for the quarter, a jump of 23%, and the fastest rate of growth since 2021. Moreover, the company's net income leapt 164% to $11.58 billion, or $4.39 a share. Both revenue and earnings exceeded Wall Street's forecasts, which was a welcome shift for investors after Meta's paramount digital ads enterprise plunged for three consecutive quarters in 2022.Shares of Meta initially surged after the report, but the gains were wiped out when Meta's finance chief Susan Li warned analysts about the instability in the Middle East. As a consequence of the battle in Israel, Meta projected fourth-quarter guidance between $36.5 billion to $40 billion. The range is farther than the $2.5 billion difference the company typically provides."We have seen softer ads in the beginning of the fourth quarter, which is in line with the start of the conflict, and it is incorporated in our Q4 revenue outlook," Li said to analysts during the call.
Despite the uncertainty around the war, many analysts remain confident in Meta's performance. Evercore analysts noted that brand advertising demand has slowed as a result of the war, which is similar to the pause in advertising after war broke out in Ukraine. However, they said ad demand has already begun to recover at Meta and they anticipate near-term market demand being more variable than usual. The Evercore analysts noted the various positives at Meta, such as the AI-driven engagement and the company's "year of efficiency" extending into years of efficiency. Morgan Stanley analysts said that while Meta has seen some pause in branded advertising, they believe the company has been less impacted than others. They said Meta's AI investments and its intensifying engagement on Reels are reminiscent of its development on Facebook and Instagram. Deutsche Bank analysts said they believe the fundamentals of Meta's business are "best-in-class" and can withstand the effects of the conflict. They added that Meta has a robust pipeline with products, including the X competitor Threads and other AI tools, that could bring about increased engagement and revenue. Consequently, they expressed great conviction in Meta's ability to sustain durable top-line growth despite the near-term volatility caused by geopolitical unrest.
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