Meta (Facebook), quarterly more than disappointing. The stock collapsed by more than 20%, 200 billion burnt

Meta (Facebook), quarterly more than disappointing. The stock collapsed by more than 20%, 200 billion burnt

Revenues of $ 33.7 billion, profit of $ 10.3 billion, both below analysts’ estimates. Zuckerberg says he is optimistic about the future in the metaverse, even if the Reality Labs segment is among those currently underperforming

03 Feb 2022
Domenico Aliperto

Throw in the stock market for Meta which can lose up to 23%. After the disclosure of the results of the last quarter of 2021, about 200 billion dollars of the market value of the parent company Facebook went up in smoke, increasingly at the mercy of competition from rivals, starting with TikTok.
The results in detail
The group closed the fourth quarter with revenues of 33.7 billion dollars, over the 33.4 expected by the consensus of analysts, but the profit was below estimates, at 10.3 billion against 11 billion. Advertising sales reached $ 32.6 billion, just above expectations of $ 32.5 billion. Meta then communicated the guidance: revenues for the first quarter should be between 27 and 29 billion, with growth over the same period of 2021 between three and 11%. This is a lower than analyst average estimate of 30.3 billion and would indicate the slowest quarter of growth in Facebook’s history. In addition to the “growing competition for people’s time”, the group explained that there is a “shift in engagement with our apps”. Users now prefer short videos, which bring in less advertising revenue.
The numbers of users are also disappointing. If the average turnover per user (Arpu) beat expectations, at 11.57 dollars, compared to the estimated 11.38 dollars, the daily active users (Dau) were lower than expected: 1.93 billion against 1.95 billion expected by analysts, according to StreetAccount. The number was also lower than in the third quarter, confirming the first quarterly decline in the Dau parameter in Facebook’s history. Monthly active users (Mau) amounted to 2.91 billion, less than the expected 2.95 billion.
The stock of the American giant thus plummeted in after hours trading on Wall Street up to -23%. “People have many choices about how to pass the time and apps like TikTok grow very fast,” Mark Zuckerberg told analysts, warning that competition in the short term will put pressure on the company’s advertising revenue. Unlike Alphabet, Google’s parent company, which announced increases in advertising revenue and revealed that Apple’s recent privacy tightening had no impact on revenue, Meta said Apple’s new policies, which make it more complicated to track users and deliver targeted advertising, is a problem. “There is a clear trend that there is less data available to deliver targeted advertising,” explained Zuckerberg.
The bet on the metaverse
“We had a good quarter as people turned to our products to stay connected and companies continued to use our services to grow,” Zuckerberg said in the official comment on the results. “I am encouraged by the progress we have made over the past year in a number of important growth areas such as Reels, 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.”
The problem is that the financial data of the Reality Labs division – the segment of the company in charge of building Zuckerberg’s vision on the metaverse front that also includes revenue from hardware, such as the Meta Quest virtual reality headset – does not leave much. room for optimism. As Cnbc points out, Reality Labs has been recording large and continuously growing losses for years: over 10 billion dollars in 2021 alone. The CFO of Meta, on the other hand, stated yesterday that operating losses “will increase significantly” in 2022 .
The negative results also put a strain on Meta’s overall profitability for 2021. The company would have had more than $ 56 billion in profit for the entire fiscal year just last year had it not been for Reality Labs. Of course, losses are part of the business risk, especially when investing in new business models. But it can’t help but notice that while Reality Labs lost $ 3.3 billion in the fourth quarter of last year, Alphabet’s Other Bets segment, which includes equally experimental projects, such as self-driving cars and health technology, lost about half, 1.45 billion, over the same period.
However, the financial data from Reality Labs show the advantage that Meta has in building the metaverse over its competitors. Zuckerberg’s firepower is unmatched when compared to resources available to smaller rivals, such as Roblox or Epic Games. Furthermore, according to the analysis of Cnbc, Meta could have a decade or more to bring home the first results that investors become impatient. Executives have already said it could take up to 15 years to fully realize their vision. That’s more than enough for Meta to switch to a new strategy as it seeks out new sources of growth.