2/2/2023

Welcome, everyone, to the latest debate. Meta is up 24% on revenue that outpaced the Street's expectations, plus signals of cost cuts and more buybacks. So will Meta's report turn out to be the most important of this earnings season? Jon Fortt is here to weigh in.

JON:

“No, it won’t be most important.

Look past that monster stock pop and the assumption that Meta did something amazing. They didn't. The quarter was just solid, with revenue down slightly from last year, up a little in constant currency. Users aren't fleeing Facebook and Instagram for TikTok. And Zuckerberg promised to buy back stock and spend less on data centers. Yay! But. The most important report of earnings season probably comes tonight. It's probably Apple. Not only does Apple have the biggest market cap out there, but it also gives us a read on high-end appetite for phones, and China's rebound in both supply chain and consumer demand. The most important detail: In this shifting economic environment can Apple thread the needle of maintaining margins, balancing inventory, and can Apple give guidance. Last quarter Apple didn't guide revenues, just said growth would be bad. And if Electronic Arts results are any indication of what the gaming-driven services business is going through, it's ugly out there. Look beyond Meta for lessons.”

Meta's report did show stability in a business model some thought was broken.

JON:

“On the other hand, Meta's earnings were the most important of the season, and that’s why.

Meta's initial plunge was almost exactly a year ago, February third, when the stock shed more than $200 billion in market cap, a quarter of its value. This was before the broader economic slowdown became obvious. The knives came out for what critics called a unique-to-Facebook problem. With the benefit of hindsight though, we see that was wrong. Yes, counting the after-hours action, Meta has lost half its value from the 2021 peak. But AMD and Amazon have lost almost as much. Tesla's lost more. Despite the hand-wringing about competition from TikTok, political peril, angry users and Apple ad targeting, Meta is figuring things out, generating cash. And paying some more attention to efficiency. Maybe not enough, but some more. Meta should be a big signal to investors who closed out 2022 with an oversimplified thesis, saying to avoid tech. Technology's still changing the world, and if you'd bought Meta after last quarter's earnings, you'd be up almost 100 percent today.”

What do you think? Which side do you find more convincing, and why? Watch how it played out on Squawk Box below: