Meta Platforms(US:META) Guotai Junan Securities·2024-11-01 12:28Investment Rating - The report maintains a "Buy" rating and raises the target price to $643 [4][18]. Core Insights - The company's Q3 performance slightly exceeded expectations, with strong profits from the Family of Apps (FoA) and significant capital expenditure to embrace AI in the future. The Llama 4 lightweight model is expected to complete training by early 2025 [3][4]. - The advertising business showed robust growth, with Q3 total revenue reaching $40.589 billion, a year-on-year increase of 19%, slightly above market expectations, driven by strong advertising demand and AI integration. The gross margin remained at 82%, and net profit was $15.688 billion, with a net profit margin of 39%, up 5 percentage points year-on-year [4][18]. - The company plans to increase capital expenditure to $38-40 billion in 2024, up from a previous target of $37-40 billion, to support AI development and core business growth [4][18]. Financial Overview - Q3 revenue from the FoA business was $40.319 billion, a year-on-year increase of 19%, with advertising revenue and other income growing by 18.55% and 48.12%, respectively. The average price per ad and impressions increased by 11% and 7% year-on-year [4][18]. - The Reality Labs segment generated $270 million in revenue, a year-on-year increase of 28.57%, primarily driven by hardware sales, although it reported an operating loss of $4.428 billion due to increased employee-related expenses and infrastructure costs [4][18]. - The updated GAAP net profit forecasts for 2024-2026 are $55.753 billion, $65.693 billion, and $72.884 billion, respectively, with corresponding PE ratios of 26X, 22X, and 20X [4][18]. Application Family Performance - The application family revenue grew by 19% year-on-year in Q3, with a stable revenue structure despite a slowdown in growth [11][12]. - The average revenue per user (ARPPU) increased by 12% year-on-year, indicating a positive trend in monetization [14]. Virtual Reality Labs - The Virtual Reality Labs segment maintained stable revenue growth, with Q3 revenue increasing by 29% year-on-year, although it continued to incur losses [16][17].