Why Facebook Parent Meta Is 'Executing Well In Difficult Environment'

It was a turnaround of sorts for Meta Platforms, Inc. FB Wednesday as the social media giant rebounded from the fourth quarter's disappointing performance.

The Meta Analyst: KeyBanc Capital Markets analyst Justin Patterson maintained an Overweight rating and $280 price target for Meta shares.

The Meta Thesis: Meta's first-quarter revenue of $27.9 billion trailed the consensus estimate, but the earnings per share exceeded Street estimates due to lower operating expenditure and share repurchases, Patterson said in a note.

On a positive note, the company lowered its operating profit guidance and CEO Mark Zuckerberg reiterated his commitment to drive long-term profitability, the analyst said.

This, according to the analyst, reflects the caution with which the company is weighing investment levels against the health of the business and the macroeconomic conditions.

Reels now account for more than 20% of the time people spend on Instagram and overall video makes up more than 50% of the time spent on Facebook, he said. 

"While Reels remains a monetization headwind over the NT, management remains comfortable with its ability to work through this transition."

Meta's guidance was also better than feared, Patterson said. 

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Meta suggested the metaverse's monetization will meaningfully lag investment, the analyst said, adding that he believes this is due to timelines around devices becoming mainstream and advertisers learning new ad formats.

"Net, we believe FB is executing well in a difficult environment and that EPS can return to a 15-20% annual growth profile in 2023E and beyond."

FB Price Action: Meta stock was soaring 15.3% to $201.71 in premarket trading on Thursday, according to Benzinga Pro data. 

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