After the performance, the stock price rose to nearly 500 US dollars, will Meta's (META.US) rally peak?

In the past year, Meta (META.US), which has repeatedly achieved outstanding results, continues to perform strongly in 2024. In early February, the company hit a historic high during intraday trading, adding about $200 billion to its market value by the close, setting a record for the strongest single-day market value growth in U.S. stocks history. Subsequently, Meta released its excellent fourth-quarter financial report and announced dividends for the first time, fueling continued enthusiasm in the market. Currently, the company's stock price is around $490, up nearly 30% from the end of January. However, behind the joy of entering the "trillion-dollar club," the high-flying Meta still faces some unfavorable factors. In the fourth quarter, Morgan Stanley reduced its holdings of META stock, decreasing its ownership from 1.13% to 1.11%; Meta's platform also faced numerous complaints in Europe, with 8 consumer organizations accusing Meta of unfairly providing paid ad-free versions to users. After the initial enthusiasm from the financial report cooled down, these negative events may cause a certain degree of correction in the company's stock price. Cost reduction efforts significant, annual net profit increases by 69% According to the company's recently released financial report, in the fourth quarter of the fiscal year ending on December 31, 2023, revenue reached $40.111 billion, a 25% increase from the same period last year, exceeding market expectations of $38.9 billion, and the largest revenue increase for Meta since the third quarter of 2021; net profit increased by 201% year-on-year to $14.017 billion, higher than the market's expected $12.89 billion; diluted earnings per share increased by 203% year-on-year to $5.33, higher than the market's expected $4.95. Thus, Meta's revenue for the full year of 2023 was $134.902 billion, a 16% increase year-on-year; net profit achieved a remarkable growth, increasing by 69% year-on-year to $39.098 billion. Due to the impressive performance, Meta announced a $50 billion stock buyback and will distribute dividends for the first time in the company's history in March, including Class A common stock and Class B common stock, distributing $0.50 per share in cash. Looking at the business segments, Meta's fourth-quarter revenue was mainly contributed by advertising revenue from social media platforms, totaling $38.706 billion in the quarter, accounting for over 96% of total revenue. Relying on advertising revenue, the Meta app series Family of Apps (FoA) including Instagram, Facebook, and WhatsApp reached revenue of $39.04 billion in the fourth quarter, a 24% increase year-on-year. Among them, Facebook's daily active users (DAUs) reached 2.1 billion in December last year, and the monthly active users reached 3.07 billion, both exceeding analysts' expectations. It is worth noting that since 2023, Meta has adopted a "lower price, higher volume" strategy, with a 9% year-on-year decrease in average ad prices and a 28% year-on-year increase in ad placements for the full year of 2023. During the financial report conference call, the company's management also stated that revenue from Chinese advertisers in 2023 accounted for 10% of Meta's total revenue, contributing 5 percentage points to the overall revenue growth. In terms of other businesses, the metaverse-related department and Reality Labs, responsible for AR and VR businesses, still operate at a loss in the fourth quarter, with a loss of $4.646 billion, higher than $4.279 billion in the same period last year. For the full year of 2023, the total loss of this department amounted to $16.12 billion, an increase from $13.717 billion in the previous year. Regarding the reduction in annual cost pressures, the cost-saving strategy implemented since the beginning of 2023 has evidently been effective, balancing the substantial expenses for AI and VR technologies while still maintaining performance growth. It is understood that as of December 31, 2023, Meta has completed its data center, downsizing, and facility integration plans, with a 8% year-on-year decrease in total costs and expenses to $23.7 billion in the fourth quarter, and the operating profit margin has increased from 25% in the previous year to 35% for the full year of 2023. Meta's CEO Mark Zuckerberg stated, "We had a good quarter with continued growth in our community and business. We made significant progress in advancing our vision for AI and the metaverse." Looking forward, Meta expects revenue to reach between $34.5 billion and $37 billion in the next fiscal quarter, higher than analysts' expectations of $33.64 billion, but did not provide annual performance guidance. In the AI boom that is sweeping the tech industry, the company will continue to increase investment, with its capital expenditure for the full year of 2024 expected to be between $30 billion and $37 billion, higher than the guidance given three months ago of $30 billion to $35 billion. Meta revealed that the company is accelerating the construction of new data center architectures and deploying new custom-designed chips in the data centers. Metaverse turning point yet to come, losses expected to continue Despite the continued success of its advertising business, the lack of a clear commercialization outlook for the metaverse has made Meta's massive investment in the metaverse a common concern for investors. The metaverse is an integration of various new technologies that creates a new type of internet application and social form where virtual and physical merge. It provides immersive experiences based on augmented reality technology, generates mirrors of the real world through digital twinning technology, and builds an economic system using blockchain technology, closely integrating the virtual world with the real world in various aspects. Since 2021, known as the "era of metaverse development," despite the vast prospects and high expectations of the metaverse concept, due to the immaturity of various technologies, content, and ecosystems, it still remains in the early stages, with even the leading AR/VR fields yet to establish mature commercial ecosystems. Affected by the turbulent global economic situation, although Sony and Meta have both launched highly anticipated new products this year, the growth rate of the global AR/VR headset market is still slowing down. According to the International Data Corporation (IDC) prediction, the global AR/VR headset market will growThe total shipment of Augmented Reality (AR) and Virtual Reality (VR) headsets is expected to reach 8.1 million units, still not reaching the tens of millions level, and a decrease of about 8.3% compared to the same period last year.IDC pointed out that by the end of the fourth quarter of 2023, Meta has firmly held the leading position in the global AR/VR device market with a market share of 55.2%. In that year, the company released the Meta Quest 3, with a starting price of $499.99 for the 128GB version. Its most important upgrade is full-color perspective, with the pixel density of colored perspective 10 times higher than the previous generation, and the device overall is also much lighter and thinner. In 2024, Meta is expected to publicly showcase the company's first true AR glasses prototype, Orion, and will launch the first AR glasses for sale to the public, Artemis, in 2027. The company clearly has high hopes for Orion, claiming that the product uses "military-grade" special silicon carbide, a price that is not affordable for ordinary consumers, and cannot be mass-produced in the short term. If the product exceeds expectations upon release, it may bring some excitement to the VR/AR industry. At the same time, Meta also admitted that despite continuing to invest heavily in the future, the RealityLab (RL) business is not expected to turn a profit in the short term. Heavy investment in AI large models, uncertainties remain? Compared to the "quiet" XR industry, Meta's progress in the AI business may be more helpful in enhancing its market valuation. In 2023, Meta successively launched the large language model LLaMa, various AI applications, and the MetaAI assistant, and has now introduced over 20 AI tools in the APP. In 2024, the company also plans to release the large model LLaMa3, expand the practicality of the Meta AI assistant, and advance the AI Studio roadmap. It is understood that Meta's long-term strategic goal is to build open-source general AI models, with the company planning to use about 350,000 NVIDIA H100 GPUs to increase computing power, at which point Meta will have nearly the computing power provided by 600,000 H100s. With the unique advantage in AI large model training provided by the social platform Beijing Vastdata Technology and content under its umbrella, Meta has unique advantages, but whether such heavy investment can truly competitive advantages remains to be seen. According to this plan, the company's expenditure on purchasing chips alone could reach approximately $8.75 billion, and if the company ultimately fails to find a balance between input and output, such a gamble may end in failure and significantly drag down the company's performance. Furthermore, the controversy surrounding social media data security remains a shadow over Meta's future. In November 2023, Meta was sued by an alliance of attorneys general from 41 states and Washington, D.C., accusing the company's social media platforms such as Facebook of illegally collecting personal account information and data from users under 13 and embedding addictive features, causing harm to children's mental health. If the lawsuit results are unfavorable, the company may face fines of up to hundreds of millions of dollars. Looking ahead, the company's core advertising business is expected to continue to grow rapidly, while upcoming AI products and XR products such as the Quest headset will become focal points of the market. Additionally, risks such as regulatory risks related to data security and AI, and XR product shipments falling short of expectations, should not be ignored.