TLDR
- Meta reports Q3 earnings after the close Wednesday. Options traders see a move of up to 6% either way.
- Analysts expect revenue of about $63 billion, up 24%, and Meta has beaten revenue estimates 16 quarters in a row.
- A $10 billion legal charge and capex of up to $145 billion are pressuring profits.
- The Muse AI agent has over 3 million daily users, but that is under 0.1% of Meta’s user base.
- 18 of 19 analysts rate the stock a buy, with a mean target of $881.
Meta Platforms (META) reports third-quarter earnings after the close today. The stock closed Tuesday near $694 and was down about 2% on Wednesday morning.
The stock is up about 5% for the year. It rallied last month on early signs of success with the Muse AI agent, then pulled back on worries about AI spending.
Options pricing points to a move of up to 6% by the end of the week. That would put the stock between $650 and $738.
What Wall Street Expects
Analysts expect revenue of about $63 billion, up 24% from a year ago. Meta has beaten revenue estimates for 16 quarters in a row.
Earnings per share forecasts differ by source. One report cites $6.54 and another cites $5.29, against $1.05 last year.
Last year’s quarter included a large noncash tax charge. Meta said EPS would have been $7.25 without it.
This quarter, Meta expects a $10 billion charge tied to its August multistate settlement over child-safety issues. Last quarter included $2.4 billion in legal costs and $1.2 billion in severance.
Costs Are the Worry
Expenses are expected to grow faster than sales. Operating income is seen slipping slightly from last year.
Capital spending may reach $145 billion this year. Meta also had nearly $700 billion in long-term supply and lease commitments at last count.
Free cash flow has dried up. Meta does not expect it back until 2029.
Meta released Muse in the second week of September. Similarweb says it has over 3 million daily users, which is less than 0.1% of Meta’s user base.
Meta also announced new Wonder AI models last week that it says rival those from OpenAI and Anthropic. Muse can complete retail purchases, with Meta taking a small fee, but Amazon is blocking it.
Morgan Stanley’s Brian Nowak raised his price target to $820 from $775 and kept an Overweight rating. He urged investors to keep adoption rates in perspective.
Deutsche Bank said Muse and other launches put Meta “at the start of a rich product cycle.”
Of the 19 analysts tracked by Visible Alpha, 18 recommend buying the stock and one is neutral. The mean target is $881, nearly 27% above Tuesday’s close.
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