Meta Platforms Q3 Earnings Preview: AI in focus with new search engine plans, analyst says company is ‘well positioned’ – Meta Platforms (NASDAQ:META)

A new report that Meta Platforms Inc META building its own search engine could put more emphasis on AI growth when the company reports third-quarter results after the market closes Wednesday.

Earnings Estimates: Analysts expect Meta Platforms to report third-quarter revenue of $40.27 billion, up from last year’s third-quarter total of $34.15 billion, according to data from Benzinga Pro.

The company has beaten analyst estimates for revenue for eight consecutive quarters.

Analysts expect Meta Platforms to report earnings per share of share in the third quarter of $5.24, up from last year’s third quarter total of $4.39. The company has beaten analyst estimates for earnings per share for six consecutive quarters.

Guidance from Meta calls for third-quarter revenue to be in a range of $38.5 billion to $41 billion.

Also Read: Metaplatforms Build AI-Powered Search Engine To Cut Dependence On Alphabet’s Google, Microsoft: Report

What analysts say: A new report from The Information detailing Meta developing its own search engine to power the Meta AI chatbot is exciting to Bank of America analyst Justin Post ahead of the earnings report.

“We believe the report makes sense as reducing reliance on large tech peers is likely a strategic priority for Meta,” Post said.

The analyst said Meta’s conference call is likely to include comments on artificial intelligence and search capabilities.

“The article suggests that by developing its own search engine, Meta aims to reduce reliance on Google Search and Microsoft Bing, which currently provide information to Meta AI.”

Post said Meta creating its own search engine would be in line with the company’s long-term goal of reducing “reliance on competitor platforms.”

“We believe Meta is well positioned to develop internal AI assistants and query answers.”

The analyst highlights Meta’s large user base and content that could help train its own LLM (large language model).

Post said the news could be negative for Alphabet down the road, but the stock did not react to the report.

“If users increasingly engage with Meta AI for information, there is a possibility that a portion of Internet traffic may shift away from Google Search.”

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

• Bernstein: Maintained outperform rating, raised price target from $600 to $675
• Jefferies: Maintained Buy rating, raised price target from $600 to $675
• TD Cowen: Maintained Buy rating, raised price target from $600 to $675
• Mizuho: Maintained Outperform rating, raised price target from $600 to $650
• Cantor Fitzgerald: Reiterated Overweight with $670 price target
• Goldman Sachs: Maintained Buy rating, raised price target from $555 to $636

Key elements to watch: Ad impressions and the price per ad will be key metrics and some will be watching to see if there is strength in the online advertising segment.

Meta reported second quarter ad impressions and average cost per ad, each up 10% year-over-year.

The progress of Meta’s AI growth will be closely observed outside of the potential search engine.

“We had a strong quarter and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” Meta CEO Mark Zuckerberg said in results for the second quarter.

The company’s costs will also be closely watched in the quarter, with Meta raising its 2024 capex to a range of $37 billion to $40 billion following second-quarter results.

META Price Action: Meta stock rose 2.6% to $593.28 on Tuesday, against a 52-week trading range of $296.86 to $602.95. Meta stock is up 70.4% year-to-date in 2024.

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