On Thursday, shares of Facebook’s parent company, Meta, fell more than 26 percent in expanded trading after the company reported disappointing earnings, issued weak guidance and stated that user growth had begun to slow in the fourth quarter of 2021.
The company also forecast weaker-than-expected revenue growth in the next quarter and is also taking a major hit from Apple’s privacy changes, marking the first quarterly decline in daily active users on record.
Meta’s stock ended with the largest one-day decline in US history. In July 2018, the company witnessed a 19% drop in share value. The recent drop shaved more than $230 billion off the market cap, bringing it down to about $660 billion.
According to a Refinitive research among analysts, Meta first announced earnings under its new name with a new reporting structure, with the following results:
- Income per Part: $3.67 vs $3.84 expected
- Revenue: $33.67 billion versus $33.4 billion expected
Refinitiv claims the company’s revenue forecast of $27 billion to $29 billion for the first quarter fell below its projected $30.15 billion.
According to StreetAccount, Facebook also missed estimates with user numbers:
- Daily Active Users (DAUs): 1.93 billion versus 1.95 billion
- Monthly Active Users (MAUs): 2.91 billion versus 2.95 billion expected
- Average revenue per user (ARPU): $11.57 vs $11.38 expected
Apple’s iPhone privacy changes, which affect ad targeting and ad measurement policies, are expected to reach $10 billion in revenue this year. Macroeconomic challenges such as inflation and supply chain disruptions would also have a huge impact on advertisers’ budgets.
According to a report by CNBC, JPMorgan analysts downgraded the stock from overweight to neutral and lowered its price target from $385 to $284. One analyst noted:
[Meta] sees a significant slowdown in ad growth as it embarks on an expensive, uncertain, multi-year transition to the Metaverse.
Facebook is also leaning towards products that generate less revenue in the short term, while executives believe they have great growth potential, such as Reels for Instagram.
Meta’s core social media business, reported under the Family of Apps, had revenue of $32.79 billion in the quarter with operating income of $15.89 billion.
Meta founder and CEO, Mark Zuckerberg, noted:
We had a solid quarter where people turned to our products to stay connected and businesses continued to use our services to grow… I’m encouraged by the progress we’ve made over the past year in some key growth areas such as roles, commerce and virtual reality, and we will continue to invest in these and other key priorities in 2022 as we work to build the metaverse.
Meta also released its Reality Labs segment for the first time, consisting of its forward-looking activities focused on the development of the metaverse. The segment posted revenue of $877 million in the fourth quarter with an operating loss of $3.3 billion. The segment reportedly lost $10 billion last year and continues to grow as the company bets more on the metaverse.
Following Facebook’s plunge, shares of other social media platforms plummeted as well. Shares of Snap fell more than 23% on Thursday. Pinterest shares lost more than 10%, while Twitter shares fell more than 5%.
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