Meta Platforms (NASDAQ:META) stock is now back at 2016 prices on the back of year-to-date losses of around 70 percent. With the company continuing to spend like there is no tomorrow in a world that is likely heading toward a recession, the post-earnings crash in Meta shares yesterday is understandable. However, CNBC’s Jim Cramer, that almost-perfect contrarian indicator, seems to have soured on Meta, creating a ray of hope for the stock’s badly-pummeled bulls.
First, let’s discuss Meta’s Q3 2022 earnings. The company reported quarterly revenue of $27.71 billion, beating the consensus estimate of $27.41 billion. At the granular level, revenue from advertising and Family of Apps came in stronger than expected, but Reality Labs – where the company is trying to reinvent itself via the much-touted metaverse – disappointed with revenue of just $285 million vs. the consensus estimate of $406.3 million.
Moving ahead, Meta exceeded consensus estimates by reporting 1.98 billion Daily Active Users but slightly missed expectations regarding the Monthly Active Users metric.
Interestingly, while Meta’s total ad impressions increased by 17 percent, the average price per ad decreased by a whopping 18 percent. For reference, analysts expected the price per ad to decline by 15.3 percent.
So, why did Meta shares crater yesterday? Obviously, the company missed consensus expectations regarding its bottom-line metric with an EPS of just $1.64 vs. an estimate of $1.89. But more importantly, two aspects were primarily responsible for Meta’s dramatic plunge: guidance and expenses.
Meta provided a relatively weak Q4 2022 revenue guidance of between $30 billion and $32.5 billion. Of course, Mark Zuckerberg did not help this situation when he noted during the earnings call:
“We face near-term challenges on revenue.”
Meta also sees a headwind of around 7 percent in Q4 2022 from the strong US Dollar.
With $META sporting a newly modest $250 billion enterprise value, its 2023 CapEx guidance of $34-39 billion is 14-16% of the entire company’s imputed value…
Must be hella good ROIC.
— Compound248: Grande Jumper (@compound248) October 26, 2022
Additionally, Meta’s expenses for the entire FY 2022 are expected to range between $85 billion and $87 billion. However, next year, the company now sees total expenses of between $96 billion and $101 billion against expectations of $93.2 billion. The company also sees Reality Labs’ operating losses worsening in FY 2023. Meanwhile, the company is also increasing its CapEx to between $34 billion and $39 billion next year to boost AI capacity as well as investments in data centers, servers, and network infrastructure.
Meta has repurchased $42BN of stock in the past 12 months at an average price of $300. It is now trading at $112
— zerohedge (@zerohedge) October 26, 2022
Worse still, Meta spent $42 billion to repurchase its own shares at an average price of $300. Given the company’s relentless cash burn with little to show for it at the moment, it is hardly surprising that the stock is currently firmly lodged in the proverbial dumpster.
It is Ford v. Facebook. Ford recognizes that it isn’t ready to produce the best Driverless and wants to spend the money elsewhere and be frugal. Frugality is a word never spoken at Facebook. At a point it is too late to sell META. But it is a seething monster of spending
— Jim Cramer (@jimcramer) October 27, 2022
Of course, the key issue here is that Meta’s entire pivot toward the metaverse is largely ethereal at this stage. Moreover, whatever material steps that have materialized so far have not been captivating. For instance, Meta’s VR-based game Horizon Worlds remains unpopular and full of bugs. Of course, Meta did recently announce the next version of its VR headset, dubbed the Meta Quest Pro. However, the headset costs around 4x as much as the Meta Quest 2. As far as the company’s vision of the future is concerned, where everyone would prefer to remain ensconced in a virtual environment, conducting work meetings via digital avatars or meeting friends and family in virtual gatherings, the underlying technology is not ready yet and won’t be for the foreseeable future.
$META what a move…
Somehow /ES doesn’t care. /NQ barely downticked. /VX doesn’t care either. Total non event.
This used to be the 5th or 6th biggest company in $SPY? Utterly destroyed. Down 70% in a bit more than a year. pic.twitter.com/JNZxXHmccw
— Yoloking of $TSLAQ (@yoloption) October 26, 2022
Nonetheless, with Meta shares recording one of their worst days ever yesterday, a case could be made that a lot of the bad news has been priced into the stock. This does invite bargain hunting. And it is here that Jim Cramer’s magic does its trick.
$90?
— Jim Cramer (@jimcramer) October 26, 2022
Cramer has tweeted now that Meta shares might be heading toward the $90 price level. Using inverse Jim Cramer logic, we can deduce that the bottom is probably in for the battered stock. After all, IndexOne’s Inverse Cramer index is up a whopping 18 percent so far this year.
Source: https://indexone.io/index/570b98f0-3518-47fe-a9b5-4191dc49ef91-0/overview
Do you think the inverse Cramer logic applies in Meta’s case? Let us know your thoughts in the comments section below.
The post Now That Jim Cramer Sees Meta at $90 per Share, Is It Finally Time To Go Long? by Rohail Saleem appeared first on Wccftech.
