'Meta Actually Has Major Profit Margins Unlike Tesla': Redditor Reacts To Stock Drop Following Q1 Earnings

Meta Platforms Inc META, formerly Facebook, recently reported a revenue and earnings beat for Q1 2024 but issued disappointing guidance for the future.

This news caused the stock to drop 11% in extended trading, overshadowing the positive quarterly results. While earnings per share ($4.71) and revenue ($36.46 billion) exceeded expectations, the company’s forecast for Q2 fell short of analysts’ estimates, with projected revenue between $36.5 billion and $39 billion.

Also Read: Meta’s Unexpected Stock Plunge Following A Strong Earnings Report And Bold AI Investment

Reddit users on r/stocks shared their views on Meta’s performance and valuation. They drew comparisons to other tech giants like Tesla Inc TSLA and discussed the company’s anticipated capital expenditures (capex) in artificial intelligence (AI).

Comparing Valuations To Tesla

Some Redditors compared Meta’s valuation to Tesla. They noted that while Tesla has a trailing 12-month price-to-earnings (TTM PE) ratio over 30, Meta’s forward price-to-earnings (FWD P/E) ratio would be around 20, based on its expected low 20s earnings per share in 2024.

They argued that Meta’s valuation is not as high relative to its growth rate and potential as Tesla’s.

“Meta actually has major profit margins unlike Tesla,” said Redditor Waitwhonow:

Redditor shawman123 compared Meta stock’s valuation to the likes of Microsoft Corp MSFT, Alphabet Inc GOOG GOOGL dba Google and Nvidia Corp NVDA. The Redditor observed that these are all valued higher relative to Meta.

AI Capex Requirement

Others highlighted Meta’s significant investments in AI and its potential impact on the company’s valuation. One user mentioned that CEO Mark Zuckerberg stated AI would require further investment before the company could profit from it.

Despite this, they argued that Meta’s forward P/E was only slightly above the broader S&P 500. This indicates that the stock may not be overvalued, especially considering its strong operating margin and double-digit growth rate.

Investor Sentiment and Market Reaction

Some Redditors expressed frustration with investor impatience, suggesting that the market’s reaction to Meta’s guidance was exaggerated. They argued that the company’s strong financial performance and strategic investments in AI should be the focus, rather than short-term fluctuations in stock price.

Meta’s recent performance and guidance have sparked lively discussions among investors on Reddit. While some view the stock’s drop as a buying opportunity, others caution that the company’s future depends on its ability to capitalize on its AI investments. As Meta continues to navigate these challenges, investors will closely monitor its progress and strategic decisions in the rapidly evolving tech landscape.

Read Next: Meta’s Q1 Earnings: Most Analysts Support AI Strategy, While One Says ‘Use Meta As A Source Of Funds,’ Questions Its Long-Term Value

Photo: Shutterstock