Meta Platforms Q2 Earnings Preview: AI In Focus As 'Advertisers Spend On The Best Digital Channels — Including Meta,' Analyst Says - Meta Platforms (NASDAQ:META)

Artificial intelligence progress and advertising spending are among the topics analysts and investors are eyeing when Meta Platforms META reports second-quarter financial results after market close Wednesday, July 31.

Earnings Estimates: Analysts estimate Meta Platforms will report second-quarter revenue of $38.3 billion according to data from Benzinga Pro.

The company reported revenue of $32.0 billion in last year's second quarter. Meta Platforms has beaten analysts' revenue estimates in seven straight quarter sand eight of the last 10 quarters.

Analysts estimate Meta will report second-quarter earnings per share of $4.73, compared to $2.98 reported in last year's second quarter. The company beat analysts' estimates for earnings per share in five straight quarters and six of the last 10 quarters.

Guidance from Meta Platforms calls for revenue to be in a range of $36.5 billion to $39 billion.

What Analysts Are Saying: Investor sentiment for Meta is mixed, RBC Capital analyst Brad Erickson writes.

The analyst, who has an Outperform rating and $570 price target said the risk/reward on Meta stock is slightly favorable.

"Sentiment has been a whipsaw over the past month where we're finding more now leaning positive near term at current levels while still maintaining relative skepticism beyond the quarter," Erickson said.

Erickson said small business marketing checks show constructive advertising spending trends for the second and third quarters.

"We believe that despite a somewhat marginally softer consumer combined with evidence of worsening KPIs, advertisers continue to spend on the best digital channels which includes META."

The analyst said Meta's ad platform and new AI tools are performing well. This could lead to increased capture rates and advertising revenue.

Outside of advertising, Erickson said Meta's artificial intelligence strategy is a key from the earnings report.

"The Street will be looking for more on the bigger picture AI monetization strategy where last quarter's performance by management was more challenging."

Here are other recent analyst ratings for Meta Platforms and their price targets:

Needham: Reiterated Underperform rating, no price target
Benchmark: Reiterated Hold rating, no price target
Wedbush: Reiterated Outperform rating, $570 price target
Bernstein: Maintained Outperform rating, raised price target from $565 to $575
Oppenheimer: Maintained Outperform, raised price target from $500 to $525
Wolfe Research: Initiated with Outperform rating, $620 price target
TD Cowen: Maintained Buy rating, raised price target from $530 to $600
Wells Fargo: Maintained Overweight rating, raised price target from $593 to $625

Key Items to Watch: AI will likely be a key item for investors and analysts. Meta CEO Mark Zuckerberg recently unveiled the rollout of an AI Studio where creators can make custom AI chatbots for social media profiles.

Job cuts and spending could be another topic that could impact the stock price. In the first quarter, Meta raised its guidance for full-year 2024 expected expenses to a range of $96 billion to $99 billion. Higher infrastructure and legal costs were cited as the reason for the change from a range of $94 billion to $99 billion.

Any further raises to expenses could spook some investors away from the stock. Meta walks a cautious line of investing in future growth like its AI roadmap and also not spending too much.

Mentioned above by Erickson, advertising rates are a key for the quarter. Meta reported ad impressions were up 20% year-over-year in the first quarter with the average price per ad up 6% year-over-year. Investors will likely want to see continued momentum and year-over-year increases for both metrics.

META Price Action: Meta Platforms shares trade at $467.50 versus a 52-week trading range of $274.38 to $542.81. Meta stock is up 47% over the last year and up 32% year-to-date in 2024.

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