Meta Q3 Preview: YTD gain 67%! Google AD success, Meta Expected Perform Well Too

Meta, which stock price has risen 67% YTD, making it the second-best performer in the Magnificent 7 after Nvidia, is set to report earnings soon. With Google's strong ad performance, Meta would perform similarly well as an AD industry peer.

As a major player in the ad industry, Meta is closely tied to the macro economy. U.S. retail sales posted month-over-month growth from July to September, with a larger-than-expected increase in September, and final October sentiment index beats estimate, both reflecting U.S strong economy. 

Global ad rates continue to climb, suggesting sustained growth for Meta's core ad business.

The online ad market continues to expand, with Meta's 2024 ad revenue nearly matching that of the entire linear TV market, according to WARC Media. By 2025, Meta is expected to surpass linear TV in ad revenue, underscoring this industry shift.

The U.S. presidential election also brings a significant boost. Data from MediaRadar CMAG shows that political ad spending for the 2024 election will reach $12 billion—almost three times that of the 2016 election. This surge could help Meta's ad revenue surpass expectations.

In the Reality Labs segment, Meta's new Quest 3S headset, priced at just $299, is far more affordable than Apple's Vision Pro, helping grow its market share. Meta's recent decision to discontinue its high-end headset and restructure Reality Labs aims to improve profitability.

For capital expenditures, Meta is expected to increase investment in AI, though it has traditionally been more cautious in capex than its peers. Google's latest report suggests that AI monetization is accelerating, which should ease concerns about Meta's AI investment.