Meta Platforms
Investors see that this is going to require a period of heavy spending as its legacy businesses mature in terms of growth. Another threat is that Tiktok is the dominant platform among younger users and is increasingly becoming the most influential social media platform in terms of time spent.
Prior to its earnings release, Meta shares were down 48% YTD and off 54% from their all-time highs in August 2021. Valuations have certainly improved as it had a forward P/E of 12.1 going into the earnings report.
Inside the Numbers
In Q1, Facebook reported $2.72 per share in earnings, topping expectations of $2.56 per share. Revenue missed expectations at $27.9 billion vs $28.2 billion which was only a 7% increase from last year.
Daily active users came in at 1.96 billion, slightly above expectations of 1.95. Monthly active users fell short of expectations at 2.94 billion vs 2.97 billion. However, average revenue per user was $9.54, above consensus expectations of $9.50.
The report was highly anticipated following its previous earnings report which saw the stock drop 26% due to a decline in daily active users. It's not surprising given that they company is underperforming in regards to several metrics while revenue growth is slowing at a rapid rate.
It was the first time in its history as a public company that it had single-digit sales growth. Next quarter's forecast also missed consensus. The company sees sales between $28 billion and $30 billion, while analysts were looking for $30.6 billion.
Facebook, Instagram, and Whatsapp accounted for 97.5% of its revenue with the other portion coming from its VR/metaverse division, Reality Labs. This segment lost $3 billion in the quarter, and this type of 'burn' is concerning investors especially with no guarantee of success.
The company noted that ad spending had dropped sharply in the initial weeks of Russia's invasion. It also anticipates a loss of users due to pulling its services out of the country. It also continue to see an impact form Apple's
