BofA Analyst Highlights Meta's Improved Reels Monetization and Rising Revenue Projections Ahead of Q3

BofA Securities analyst Justin Post reiterated a Buy rating on Meta Platforms, Inc META with a price target of $375.

Post cut his estimates for recent currency translation changes and is still in line with Street for 3Q revenue. His checks suggest Meta benefits from improving the digital ad market, ramping Reels monetization, and improving AI-driven ad measurement. 

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The analyst now estimates 3Q revenue at $33.5 billion (up 21% Y/Y), in line with Street, and EBITDA at $18.5 billion and EPS at $3.79, above Bloomberg estimates of $17.9 billion and $3.60, respectively. He expects in-line to modest beat for DAUs.

The analyst expects possibilities of a higher-than-expected 4Q growth outlook, strong traction for Reels monetization, and positive commentary on AI-driven engagement and ad spending benefits. 

Assuming Meta adds some conservatism in the 4Q outlook given the evolving macro and geopolitical landscape, he expects a 4Q revenue guide around $37.5 billion - $40.5 billion (vs. Street at $38.7 billion). 

With baseline 2023 expenses around $85 billion, he thinks FY24 total expense guidance could bracket $100 billion assuming higher depreciation, compensation increases (more tech talent), more Oculus units and RL investments, flattish average Y/Y headcount, and usual cushion in the guide. 

With Street at expenses of $96 billion, guidance could create some volatility, but Street will likely see a cushion in the guide. 

Post projects FY23 revenue and EPS of $133.41 billion (prior $133.98 billion) and 18.50 (prior $18.56). He estimates FY24 revenue and EPS of $151.77 billion (prior $152.63 billion) and 23.00 (prior $23.02). 

The analyst expects FY25 revenue and EPS of $169.1 billion (prior $169.87 billion) and 26.45 (prior $26.47).

Price Action: META shares traded lower by 1.01% at $309.64 on the last check Friday.