PhillipCapital has maintained its “buy” call and target price of US$312 ($433) as the company's 1QFY2022 earnings came in line with the brokerage’s expectations.
1QFY2022 revenue and PATMI came in at US$27.9 billion and US$7.4 billion respectively, at 21% and 22% of PhillipCapital’s forecasts.
Analyst Jonathan Woo notes that earnings per share for Meta came in at US$2.72 for the quarter, beating consensus estimates of US$2.56.
This was partially due to a lower than expected total expenditure for the quarter, indicating that the company’s slowdown in earnings was not as bad as analysts feared.
Woo also highlights that Meta registered positive user growth across all metrics for 1QFY2022.
Meta recorded 3.64 billion Family Monthly Active People (MAP) for 1QFY2022, increasing 6% y-o-y, and slightly over 1% q-o-q.
Specifically for Facebook, monthly active users (MAU) grew 1% q-o-q and 3% y-o-y to 2.94 billion, with Daily Active Users (DAU) rebounding from a negative q-o-q growth in 4QFY2021 to a 2% q-o-q growth.
Overall, growth was driven by the APAC region, with most other regions either flat or slightly contracting.
However, Woo does warn that there will be a “continued negative impact” on revenue from suspending operations in Russia, and from a strengthening US dollar.
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“Revenue headwinds continue in Russia, where its services are totally suspended. Also, the company estimates a 3% headwind to y-o-y growth in revenue for 2QFY2022 as a result of a strengthening US dollar.”
He also highlights that Apple’s App Tracking Transparency (ATT) changes continue to pose a headwind for Meta, with its changes decreasing the effectiveness and the tracking capabilities of Meta’s targeted ads.
Apple’s ATT were a privacy safeguard implemented by Apple during its iOS 14 update that allows users the ability to choose what kind of data, and to whom they wish to give their data to.
In response, Meta says overcoming these challenges using AI and machine learning will continue to be a long term challenge that it is focused on.
Moving forward, Meta guided 2QFY2022 revenue to be in the range of US$28 billion- US$30 billion, a 1-7% q-o-q increase compared with 1QFY2022, with this guidance reflecting revenue trends that are expected to continue.
Woo says, “This guidance is also in line with our estimates. Taking the midpoint guidance of US$29 billion (0% y-o-y growth), 1HFY2022 revenue will work out to be around 43% of our FY2022 revenue estimates.”
Meta also lowered its FY2022 guidance on total expenses from US$90 billion-US$95 billion, to US$87 billion- US$92 billion, but still expected the majority of expense growth to come from the Family of Apps segment.
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This is as it increases data centre capacity, and invests heavily in Artificial Intelligence (AI) to improve overall efficiency.
He also points out that regulatory legislation continues to be an overhang for the company, with Meta working together with the EU to finalise the wordings of the newly created EU Digital Markets Act, which was primarily created to be a “gatekeeper” for big tech companies, and prevent them from indulging in monopolistic practices.
As at May 9, shares of Meta were closed at US$196.21, down 3.71% or $7.56 lower than its previous close. PhillipCapital forecasts a P/E ratio of 18.7 and a return of equity (ROE) of 23.2% for FY2022.
