Here’s a quick wrap of the Big American Tech names and how they did during the last (December) quarter, Q4 of 2022.

Underwhelming was the watchword for Apple, Alphabet and Amazon Thursday after play – giving the Nasdaq futures a kick on the way out to the weekend.

Still, the Nasdaq’s had its best January in 22 years.

Anyway, let’s not kill the buzz after Meta made its way back from the edge of the known metaverse.

Now going by the plume de nom, Meta Platforms (META) the social media giant literally got expansive in after trade – up more than 20% on Wednesday last week in the States as traders jumped back onto a more confident Facebook and a less weepy CEO Mark Zuckerberg.

The unexpected resurgency came on the back of a Big Tech revenue beat, as well as a Very Big Tech $US40bn share buyback program.

Meta also released a Q1 sales forecast towards $US28.5B, which would top sales seen during Q1 of 2021 (and a few moments before Apple’s (AAPL) privacy measures heavily whacked its ad revenues).

On a conference call last week with analysts, The Zuck called 2023 the “year of efficiency,” to the delight of the crowd.

O the same day, a federal judge ruled in favour of a Meta M&A move deeper into the virtual reality metaverse, a Big Tech win for Big Tech, a low blow to the US FTC.

 

Alphabet Q4 misses on bottom and top line

As a result shares dropped -5%.

  • Revenue: Came in at US$76.05b, slightly missing consensus at US$76.51b
  • Google Cloud revenue was in line with estimates
  • Google advertising revenues were one drag, coming in at US$59b
  • YouTube Ad revenues were another, undershooting consensus by 4%
  • Operating income was US$18.16b
  • EPS: US$1.05, missing consensus at US$1.20 per share

Okay. So they are feeling the pain as advertisers cut budgets, and the business is under the new sensation (it’s called pressure) from new, competitive threats like TikTok.

On threats to their core search business from ChatGPT, they went some way to tout the company’s own investments in AI, and assured markets that they are extremely well positioned as AI reaches an inflection point, and that they have exciting AI-driven leaps that they are about to unveil in Search.

 

Amazon has a Q4 beat on expectations

Amazon 4Q result wins on revenue and operating income, but misses on net income.

As a result of that miss shares also dropped -5%

  • Revenue: Net sales beat estimates at US$149.2b, +8.6% y/y and ~2% ahead of consensus
  • North America net sales fell, so their core business of selling things online in the US has lost money for the 5th straight quarter.
  • AWS revenues missed consensus, coming in at US$21.3b vs US$21.7b
  • Operating income was US$2.74b, -21% y/y
  • EPS came in at 3c, and the margin contracted for the 3rd consecutive quarter, coming in at 1.8% (below consensus at 1.85%)

Partly to blame there, AMZN took a US$2.3b pre-tax hit from Rivian, after the electric vehicle start-up fell -44% over the quarter (AMZN owns a 17% stake).

Guidance is a little weaker than what markets were expecting too.

AMZN sees Q1 sales US$121 – US$126b, consensus is at US$125.6.

Operating income at US$0 – US$4b, (consensus is at US$3.5bn).

That income outlook doesn’t make it appear that the 18,000 layoffs announced are sufficient to reverse the trend, so there will need to be a focus on further cost-cutting on the call.

 

Apple misses on Q4 revenue, profit, sales, iPads and Macbooks

Sales dropped -5%, the largest quarterly revenue decline since 2016.

The results were affected by three factors, according to chief apple Tim Cook:

  1. A strong USD
  2. Production issues in China;
  3. And the rotten macro-environment

On the numbers:

  • EPS fell -11% y/y and missed consensus by 3%
  • Revenue missed consensus by 1%,
  • iPhone sales missed by 4%
  • Mac missed by 20%
  • iPad was ahead by 20%, and;
  • Services was slightly ahead
  • Gross margin was also in line with consensus

 

Meta beats Q4 all over

And Broker upgrades follow…

Meta Platforms’ upbeat surprise has led to a slew of analyst upgrades.

So after a brutal 2022, Zuckerberg and Friends rounded out the year with US$32.17 billion in revenue, beating Wall Street expectations of US$31.65 billion.

The market really liked:

  • Reported revenue of US$32.2b (about 2% ahead of consensus) and;
  • Adjusted EPS of US$4.32 (about 44% ahead of consensus)

It was just an all-around strong result, eToro market analyst Josh Gilbert says, but The Zuck still needs a reality check on his pet Meta project Reality Labss.

“The solid result was driven by robust advertising revenue that comes with no surprise given that Facebook reached 2 billion users at the end of last year, an eye-watering number that will continue to attract advertising dollars, even if spending is slowing.

“Investors are looking for positive guidance from management as we head into a period of uncertainty. Meta’s Q1 revenue coming in above estimates will offer some relief after one of the worst years in the stock’s history.

Josh added that investors will draw more confidence in the US$40 billion share buyback, which ‘clearly indicates’ the company feels its shares are undervalued:

Ad revenues beat expectations:

  • Zuck highlighted diminished TikTok concern (feels good on Reels strategically);
  • Materially reduced expense projections, once again refining 2023 OpEx (now in the range of US$89-US$95b vs US$94-US$100b prior and initial US$96-US$101b) and;
  • CapEx (US$30-US$33b vs US$34-US$37b prior and US$34-US$39b initial), meaning the aggregate annual savings from this update is about US$9b for 2023;
  • Announced this larger-than-expected buy-back; and
  • Provided an outlook for better-than-expected 1Q revenues, underscoring improvements in ad technology

Saxo Markets analyst Jessica Amir told Stockhead that Facebook surprised with a strong climb after both the US$40 billion boost to its share buyback, and it’s guidance for stronger than expected revenue.

“Seeing revenue hit US$26 to US$28.5 billion, with that bullseye target being more than expected (at US$27.25 billion).”

“Q4 revenue beat expectations, falling to US$32.2 billion, vs US$31.7 billion expected. The business sees outgoing expenses dropping more than expected (to US$89-95 billion) and lower capital expenditure.

Also on the positive, Facebook’s daily users improved more than the market expected. From a technical perspective Meta shares closed above their 200-day simple moving average.

“It also appears, a golden cross is forming which could trigger quant trader buying. Clock that and keep an eye on it for further upside,” Jessica said.

 

eToro: Much beta, but costs still an issue for Meta

Josh says despite the positivity, costs continue to be an issue for Meta.

“Meta’s virtual reality push, Reality Labs, lost another USD$4 billion in the quarter, taking its total loss to $USD13.5 billion for the full year. These losses, amid other rising costs, are crushing its free cash flow, which fell by more than 60% in 2022.

“Zuckerberg has touted this will be the ‘year of efficiency’ for Meta.

“This will likely mean further cost cuts and could imply further layoffs after its recent job cuts in November. But, Meta is serious about preserving margins saying 2023 expenses will be US$89-95 billion, that’s US$5 billion less than its previous estimate.”

Meta shares have lifted 25% (last close: US$188.77, +23.7%) and will more than likely continue to show some form as the brokers re-jig their ratings:

  • UBS Recommendation: Buy / Price Target US$235 (prev. US$158)
  • Credit Suisse Recommendation: Outperform / Price Target US$220 (prev. US$180)
  • Consensus Recommendation: Buy / Price Target US$203

UBS’ new price target of US$235 (from US$158) is based on 18x P/E on ’24 (prev. 15x), which is pretty much in line with the S&P 500.