Shares of Meta Platforms (META) and Amazon (AMZN) rose after both technology companies reported strong financial results on Thursday. Bernstein Internet His Research His analyst Mark Shmulik joins Yahoo Finance Live to break down the biggest Big Tech drivers of earnings season so far, specifically the outlook for Meta.
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Editor’s note: This article was written by luke carberry morgan.
video transcript
Akiko Fujita: Now, Meta and Amazon stock prices continued to rise today, hitting new highs during trading hours as investors cheered the latest quarterly results. The strong fourth quarter was primarily driven by a rebound in digital advertising sales. Amazon posted 27% year-over-year growth, while Meta more than tripled his overall sales year-over-year, with the majority of that coming from advertising.
We’re joined now by Bernstein Internet Research Analyst Mark Shmulik. Mark, you know a lot of this is about setting expectations. Certainly, investors liked what they saw after the bell yesterday. How can we line up these names we’ve seen this week and see why these particular names are valued so highly today?
Mark Schmulik: Yeah. Look, this quarter started with the meta coming out on top, and we certainly saw a divergence. Amazon has certainly gone up quite a bit. Google fell as much as Amazon and of course some other companies rose as well.
And the biggest reason for that is, coming into this year after the Magnificent Seven had a great year last year, there was a really great conviction about a really good idea of what we own in the internet and technology space. I think there weren’t many things like that. And I think the companies that published their numbers where it mattered most and allayed the biggest fears and concerns about a particular name performed best. Meta, the biggest question heading into 2024 was do I really want to own Meta in a slowing revenue growth environment? Can we really trust them to contain costs? And they have released monster guidance that suggests the question we need to ask is: How long can we sustain this situation?
And when it comes to Amazon, there was certainly a lot of excitement and optimism that 2024 would be the year they finally realized change in operating income. You know, we’ve been hoping for a long time and that’s exactly what happened. They did it. They beat operating income in the fourth quarter by a very large margin. Their comments suggest that operating income growth is sustainable, and it shows in the first quarter guidance. And this is exactly what investors want to see right now.
Rachel Akuffo: And Mark, you called Meta, especially for that quarter, the Patek Philippe of the internet. This is a very important statement, especially considering the price and importance of Patek Philippe and its watches. As you mentioned, talk about what makes the meta stand out and what maintains its dominance. If they’re going to get to the top, what’s going to keep them there?
Mark Schmulik: Yes, as a watch lover, I haven’t worn a watch yet. But I think there are actually a few reasons why I called it Patek Philippe. Patek’s famous slogan is that you don’t actually own the product, you just keep it for a generation. And the biggest complaint about long-term investors in Facebook and now Meta is that there has always been a perception that social media has an expiration date.
And I think the more important thing I took away from this earnings was not the earnings beat or the 2024 guidance. That is wonderful. You need a strong core. But what they’ve really shown is the longevity of this business and this vision that Mark has that we’ve all wondered about at some point in the past.
The adjacency is there. Thread usage is increasing. Reel usage is increasing. WhatsApp is growing in the US.
It has over 3 billion users. And Facebook Blue continues to grow in the US. This won’t do anything. And in the long run, all the investments in AI and the Metaverse have a way of finding a way for this company to last forever, whether you believe it or not. So, just like with Patek, my comment here is that you can own stock in Meta and pass it on to your children.
