I agree with Mark Mahaney that Meta’s Y/Y growth in Q3 will likely look very impressive.
Meta’s Q3 2022 has been particularly weak due to the impact of Apple’s privacy policy changes at $27,714 (-4% y/y)
For Q3 2023 Meta is now guiding a range of 32-34.5 billion. That’s 15.5% - 24.5% growth Y/Y. Adjusted for FX we get approx. 9.5%-18.5%.
Importantly Reels is still a headwind for Meta’s business and will turn into a tailwind towards the end of the year.
So it is probably fair to say that we are seeing Meta specific advertising strength as they successfully rebuilt their advertising technology stack and are overcoming Apple’s privacy policy challenge. (Similarly to Volkswagen we should develop an “Advertising Industry Players” article to increase our overview of how different advertising players are developing)
One could obviously argue that Metas has the easier Q3 comps. (e.g. 10% easier than Alphabet) but imo that kind of catch-up in the face of strong challenges is impressive.
Increased Reality Labs spent will be a drag for my EPS growth assumptions but will fundamentally not drastically change the investment case. (The underlying profitability of Family of Apps is important. Reality Labs spending could be reduced again in case there is no sufficient adoption of Meta Quest 3 and Apple Vision)
Overall I am continuing surfing the wave on AI adoption as I still feel comfortable with current Meta valuations and think that Meta has a chance similar to Microsoft, Nvidia, or Apple to reach new all-time highs towards the end of the year if we see no significant deterioration of the economy.
