Anxin International: Meta's (META.US) performance/guidance greatly exceeded expectations, and it is expected that the core advertising business will maintain high-speed growth in the future.

, AX International released a research report stating that Meta (META.US) released its 4Q23 and full-year performance. The total revenue for this quarter was 40.1 billion US dollars, a significant increase of 25% compared to the same period last year, exceeding the high end of the company's 3Q23 performance guidance and the market's expectation of 39 billion US dollars. The company's full-year revenue was 134.9 billion US dollars, a year-on-year increase of 16%. The operating profit for the quarter was 16.4 billion US dollars, a year-on-year increase of 156%, with an operating profit margin of 41%, an increase of 21 percentage points compared to the same period last year and 1 percentage point compared to the previous quarter. The net profit for the quarter was 14 billion US dollars, a year-on-year increase of 201%, and the full-year net profit was 39.1 billion US dollars, a year-on-year increase of 69%. The company expects revenue for 1Q24 to reach 35.4-37 billion US dollars, exceeding the market's median expectation of 35.4 billion US dollars. It also announced the first dividend distribution of 0.5 US dollars per share. The company's FoA active user growth remains stable, and the effect of the advertising "price reduction and volume increase" strategy is significant. The company expects the core advertising business to maintain high-speed growth in the future. The focus of 2024 will be on the company's upcoming AI products and the number of shipments of the Quest virtual reality headset. Key points from AX International are as follows: - Monthly active users (MAU) and daily active users (DAU) continue to grow steadily. - FoA revenue for this quarter was 39 billion US dollars, of which advertising revenue reached 38.7 billion US dollars, a year-on-year increase of 24% and a quarter-on-quarter increase of 15%. The MAU and DAU for FoA this quarter reached 3.98 billion and 3.19 billion, respectively, with year-on-year growth of 6% and 8% and quarter-on-quarter growth of 1% and 2%. The DAU/MAU retention rate for 4Q23 was 80%, surpassing the 80% retention rate for the first time in the past three years. This quarter, Facebook (excluding Instagram and WhatsApp) had a quarter-on-quarter growth of 1% and 0.5% in MAU and DAU, reaching 3.07 billion and 2.11 billion, with a retention rate of 69%. - Since 2023, the company has implemented the advertising "price reduction and volume increase" strategy to increase advertising traffic. The average advertising price decreased by 9% compared to the previous year, but the global demand for advertising and the expansion of the company's platforms led to a 28% increase in the volume of advertising placements compared to the previous year, with ARPU increasing each quarter. 4Q23 ARPU was 13.12 US dollars per user, a year-on-year increase of 21% and a quarter-on-quarter increase of 17%. In addition, with the expansion of Instagram and WhatsApp's influence, the company will release more detailed advertising placement data in the future to better reflect the revenue growth of the company's full-stack apps, replacing the current Facebook DAU and MAU data (including ARPU). - The revenue from the metaverse business exceeded the milestone of 1 billion US dollars. Driven by strong holiday consumption in North America, the shipment volume of the Quest 3 virtual reality headset by the company increased significantly. In 4Q23, the company's RealityLab (RL) business revenue reached 1.1 billion US dollars, a year-on-year increase of 47% and a quarter-on-quarter increase of 410%. The operational loss for RL business in the quarter was 4.6 billion US dollars. The metaverse business is a long-term strategic goal for the company, and with the release of Apple VisionPro, the maturity of the industry will rapidly increase. The company expects that the RL business unit will not be able to turn a profit in the short term and will increase investment in XR projects in the future. - Continued development of AI products and increased research and development investment. In 2023, the company launched the large language model LLaMa, various AI applications, and MetaAI assistants, and has now introduced more than 20 AI tools in its apps. The company's goal for 2024 is to launch the large model LLaMa3 and expand the application capacity of AI across all platforms. With the analysis of users' habits and the combination of AI technology to improve advertising placement efficiency, the company's AI products will continue to provide growth momentum for the core business. The company's 2024 Capex target is 30-37 billion US dollars, which is 2 billion US dollars higher than the previous guidance, mainly for AI research and development and database construction. - Better-than-expected performance guidance and first-time announcement of dividend distribution. 1) The company expects total revenue for 1Q24 to reach 34.5-37 billion US dollars (year-on-year +25%), exceeding the market's expectation of 35.4 billion US dollars; 2) The full-year operating expenses for 2024 will be between 94-99 billion US dollars, a year-on-year increase of 10%, mainly due to the increase in hardware-related expenses, labor costs, and XR development expenses. The company announced that it will distribute a regular dividend of 0.5 US dollars per share in March 2024, marking the first quarterly dividend distribution since the company's inception. Investment advice: The FoA active user growth of the company remains stable, and the effect of the advertising "price reduction and volume increase" strategy is significant. It is expected that the core advertising business will maintain high-speed growth in the future. The focus of 2024 will be on the company's upcoming AI products and the number of shipments of the Quest virtual reality headset. The current price corresponds to a P/E ratio of 25x/22x for 2024E/2025E, which is at a historically high level, reflecting the market's recognition of the company's performance growth and AI technology innovation. The company repurchased $20 billion worth of stocks in 2023, with a remaining repurchase amount of $30.9 billion, and also announced a $50 billion stock repurchase, which may provide strong support for the stock price. Risk factors: Decline in monthly active users; lower-than-expected advertising demand; AI regulatory risks; lower-than-expected shipments of Quest.