Facebook Earnings Beat Drives Meta Shares Soar, But Sales Have Slowest Growth in a Decade

Facebook Earnings Beat Drives Meta Shares Soar, But Sales Have Slowest Growth in a Decade

Meta Platforms Inc. is the latest tech giant to feel an economic pinch, as Facebook’s parent company reported its slowest sales growth in a decade on Wednesday and issued a lukewarm revenue guide.

“Headwinds to revenue” are likely to lead to a slowdown in investment, Meta chief executive Mark Zuckerberg said in a webcast presentation with analysts late Wednesday.

However, Meta’s equity FB,
-3.32%
jumped more than 18% in after-hour trading Wednesday after the company formerly known as Facebook revealed first-quarter earnings of $ 7.47 billion, or $ 2.72 per share, down from $ 9 , 5 billion, or $ 3.30 per share last year, on revenue of $ 27.9 billion, up 7% from $ 26.2 billion a year ago.

Earnings beat the average profit forecast of $ 2.56 per share, but sales were below the consensus of $ 28.3 billion, according to analysts surveyed by FactSet.

Meta issued a second quarter revenue forecast of $ 28 billion to $ 30 billion, while analysts expected $ 30.7 billion. Facebook executives cited inflation, supply chain problems, the war in Ukraine, headwinds in the European economy, increased competition from services like TikTok, and changes in Apple Inc. AAPL,
-0.15%
done to its mobile operating system which makes it harder for apps to track consumers in ads.

What’s more: Meta CFO shouts “wolf” again with a gloomy view of Facebook, but this time he may be right

In a white paper released by Apple on Tuesday, Kinshuk Jerath, a professor of economics in Columbia Business School’s marketing division, concluded that it would be speculative to claim that billions of ad dollars have been transferred from companies like Meta to Apple due to Apple’s move.

“This outlook reflects a continuation of trends impacting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine,” Meta’s Chief Financial Officer David Wehner said in a statement. statement announcing the results. “Our guidance assumes that foreign currency will be around 3% against year-over-year growth in the second quarter, based on current exchange rates.”

In the presentation of the webcast, Zuckerberg acknowledged the impact of TikTok and Apple, but said that Meta was confident in its Reels short-form videos and AI to target each company respectively. He added that the company’s push towards the metaverse will also increase revenue, especially in advertising.

The mixed the results come on the heels of lighter-than-expected sales and earnings from Google’s parent company Alphabet Inc GOOGL,
-3.67%

GOOG,
-3.75%
On Tuesday, growing fears that ad-addicted companies could face a tough time with a raging war in Ukraine and inflation burning in consumers’ pockets. Snap Inc. rushed,
-5.58%
warned of a “tough operating environment” when it reported results last week, although Pinterest Inc. PIN,
-2.86%
Stocks also skyrocketed after Wednesday’s earnings.

Daily Active Users, or DAUs, a crucial metric for Meta’s growth globally, increased 4% to 1.96 billion, surpassing analysts’ expectations of 1.95 billion. The upside has largely calmed investors, who have been openly concerned about decreasing user engagement on Facebook’s platforms.

“The (SAD) growth is a good sign for Facebook, especially starting in the fourth quarter of 2021, when it experienced its first ever SAD decline. But it is also clear that Facebook is still struggling to attract new users and it is becoming increasingly difficult for Instagram to catch up on the game, “said Evelyn Mitchell, an analyst at Insider Intelligence.” Most of the growth in both [monthly active users] and the SADs in the first quarter came from the rest of the world, not the US and Canada, which monetizes at a better rate. “

Read more: These 21 large-cap stocks have now plummeted by at least 50%

Meta’s stock was among the worst in the tech sector this year, dropping 48% so far, while the broader S&P 500 SPX index,
+ 0.21%
it fell 12% in 2022.

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