Thu 27 October 2022:
Shares of Facebook’s parent company Meta Platforms Inc fell 14% after it predicted a bad holiday quarter and considerable more losses from Metaverse investments in 2019.
In extended trading, the forecast on Wednesday reduced its stock market value by nearly $40 billion. In addition to the disappointing future, Meta must deal with TikTok’s rivalry, the deteriorating global economy, worries about large spending on the Metaverse, and the constant danger of regulation.
The Facebook parent company beat estimates for quarterly revenue, which fell 4 percent to $27.7bn in the third quarter that ended September 30, from $29bn last year.
That deepened a revenue decline begun the previous quarter, when the company posted a first-ever revenue drop of 0.9 percent, but was less steep than the 5.6 percent decline Wall Street had expected, according to IBES data from Refinitiv.
Meta also posted user growth figures roughly in line with expectations, including a year-over-year increase of monthly active users on its flagship app Facebook.
More worrying was the company’s estimate that fourth-quarter revenue would be in the range of $30bn to $32.5bn, lower than analysts’ estimates of $32.2bn.
Additionally, Meta projected that its full-year 2023 expenses would be in the range of $96 billion to $101 billion, an increase from a previously estimated 2022 expense range of $85 billion to $87 billion.
This includes a projected $2.9 billion in costs for “consolidating our office facilities footprint” between 2022 and 2023.
According to Meta, it is cutting the number of employees in some teams and only investing in headcount growth “only in our highest priorities”.
The third quarter’s total costs, which were $22.1 billion instead of $18.6 billion the year before, were more than expected. Analysts predicted approximately $20.6 billion.
Net income in the third quarter fell to $4.40bn, or $1.64 per share, from $9.19bn, or $3.22 per share, a year earlier, the company’s worst showing since 2019 and the fourth straight quarter of profit decline.
“The worry for Meta is that this pain is likely to continue into 2023 as cost headwinds remain a real challenge and the strong dollar impacts on overseas earnings,” said Ben Barringer, equity research analyst at Quilter Cheviot.
“Given revenues were down at a time when costs have grown significantly, modest user growth and impressions simply isn’t going to bail you out.”
One of the biggest ad-dependent digital companies, Meta is the most recent to suffer from a reduction in marketing spending as inflation climbs. Alphabet, the company that owns Google, missed its quarterly revenue projections on Tuesday. Prior to this, Snap Inc., the company behind the photo-messaging app Snapchat, witnessed a 25% decline in share price after reporting the slowest revenue growth since going public five years ago.
SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES
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