My Meta Price Target and When I'd Pull the Trigger
Mark Zuckerberg's company hit it out of the park -- will there be more to come?
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Meta Platforms (META) posted fourth-quarter financial results last night, and those results were outstanding.
Unadjusted earnings per share landed at $8.88 on revenue of $59.893 billion. The top-line print was not only good for year-over-year growth of 23.8%, but crushed expectations by nearly $1.5 billion. That bottom-line number outpaced the consensus view by $0.66 per share. META did not just beat Wall Street, it pummeled it into submission.
While those results were more than impressive in their own right, the stock traded considerably higher overnight and the primary reason for that run was the revenue guidance. We'll get to that further below. Family (of apps) Daily Active People, or DAP, averaged 3.58 billion for December, up 7% year over year. Ad impressions across the family of apps was up 18% annually for the fourth quarter and up 12% for the full year. Average price per ad increased 6% for the fourth quarter and increased 9% for the year. Those numbers all impress. Let's dig in...
Operations
As revenue was increasing nearly 24%, costs and expenses grew 40.5% to $35.148 billion. This left operating income of $24.745 billion (+5.9%), which was good for an operating margin of 41.3%. That was down from 48.3% for the year ago comp, but better than the 40.8% that Wall Street had priced in.
After accounting for interest, other income & expenses and taxes, unadjusted net income printed at $22.768 billion (+9%) or $8.88 per fully diluted share. That compares well to the year-ago comparison of $8.02.
Segment Performance
- Family of apps generated revenue of $58.938 billion (+24.6%), producing operating income of $30.766 billion (+8.6%).
- Reality Labs generated revenue of $955 million (-11.8%), producing an operating income / loss of $-6.021 billion (-21.2%).
Guidance
For the current quarter, during the call, CFO Susan Li said, "We expect our first quarter 2026 total revenue to be in the range of $53.5 billion to $56.5 billion. Our guidance assumes foreign currency is an approximately 4% tailwind to year-over-year total revenue growth based on current exchange rates."
Wall Street had been looking for something close to $51.4 billion. That was what was priced in. The stock took off.
Li added, "Turning to the expense and Capex outlook. We expect full year 2026 total expenses to be in the range of $162 billion to $169 billion. The majority of expense growth will be driven by infrastructure costs which includes third-party cloud spend, higher depreciation and higher infrastructure operating expenses."
Fundamentals
For the period reported, META generated operating cash flow of $36.214 billion (+29.4%). Out of that number came capital spending of $21.383 billion (+48.2%) and principal payments on finance leases of $754 million. That left free cash flow of $14.077 billion. That's up just 7% from the year-ago period, but almost $2 billion better than Wall Street was looking for.
Turning to the balance sheet, META ended the quarter with a cash position of $81.592 billion and current assets of $108.722 billion. Current liabilities add up to $41.836 billion. That puts the current ratio at 2.59., which is excellent.
Total assets amount to $366.021 billion, of which intangibles make up a tiny percentage. Total liabilities less equity comes to $148.778 billion, including $58.744 billion in long-term debt. That's something the fir could easily handle out of pocket, if need be, this is a top-notch balance sheet.
Thoughts
Strong results. Strong guidance. Strong cash flows. Strong balance sheet. Enough for you? Clearly, since last summer, many on Wall Street to include yours truly, have underestimated Mr. Zuckerberg and his company. There's a lot to like here.
Readers will see that META is blasting out of a Double Bottom pattern of bullish reversal with a $711 pivot. The unfilled gap from late October has been filled and a new one has been created. The stock has retaken its 200-day simple moving average and then some. That will force the pros to increase long side exposure. The relative strength index has spiked in a northerly direction as the daily moving average convergence divergence has suddenly moved into a more bullish posture.
I am not long the shares, but I think I probably should be if we do see a pullback later today or tomorrow from that gap-fill. If I were long, my target price would be around $854 based on my models.
At the time of publication, Guilfoyle had no position in any security mentioned.
