Why Meta Platforms stock charged sharply on Thursday

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Meta Platforms (NASDAQ: FB) surged on Thursday, adding as much as 19%. As of 12:36 p.m. ET, the stock was still up 16.5%.

The catalyst that drove the social media specialist higher was a first-quarter earnings report that exceeded expectations on some measures, helping allay investor fears that its growth had peaked.

So what

Meta Platforms, the company formerly known as Facebook, reported revenue of $27.9 billion, up 7%. Unfortunately, costs and expenses rose 31%, eating into the company’s profits. Meta Platforms generated net income of $7.5 billion, resulting in earnings per share (EPS) of $2.72, which declined 18%. 

To put those numbers in context, analysts’ consensus estimates were calling for revenue of $28.3 billion and EPS of $2.56. So while Meta’s revenue missed the mark, its better-than-expected profits gave investors some comfort.

Perhaps more importantly, Meta Platforms increased its users in the first quarter, after reporting a sequential decline of roughly 1 million daily active users (DAUs) in Q4. Facebook’s DAUs — perhaps the company’s most-followed metric — grew to 1.96 billion, up 6% year over year, and up from 1.93 billion in the fourth quarter. The platform’s monthly active users of 2.94 billion climbed 3% year over year, while also adding users sequentially.

Other user metrics helped salve investor concerns. Users across Meta Platforms’ family of social media products also rose, with daily active people and monthly active people each rising 6% year over year, while also edging higher quarter over quarter.

Now what

CEO Mark Zuckerberg gave shareholders some additional good news. During the conference call to discuss the results, Zuckerberg said that “with our current business growth levels, we are planning to slow the pace of some investments.” This seemed to signal to investors that the rampant spending on the coming metaverse would moderate, which was welcome news to shareholders.

By laying the groundwork for potential opportunities in the metaverse while not losing sight of its ad-driven business, Meta Platforms help calm investor concerns that the company helped fuel just last quarter. This strategic focus on its existing cash cow business and a return to user growth are the reasons Meta Platforms remains a buy. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Meta Platforms stock charged sharply on Thursday appeared first on The Motley Fool Australia.

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More reading

Danny Vena has positions in Meta Platforms, Inc. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Inc. The Motley Fool Australia has recommended Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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