It Doesn’t Meta

Facebook reported earnings today on February 2nd, 2022. The company missed expectations for the first time since April 2020 and is currently down 22% in after-hour trading. 

$FB | Meta Platforms Q4 21 Earnings:  

– Revenue: $33,67B (exp $33.43B)  

– EPS: $3.67 (exp $3.84) 

– Facebook Daily Active Users: 1.93B (exp 1.95B) 

– Sees Q1 Revenue $27B- $29B (exp $30.25B)

The stock sits around 250 dollars a share. Their report in July of 2020 left an earnings gap open that has the potential to be filled by the end of the week with the gap going as low as 235. Facebook recently introduced its plan to enter the “Metaverse” which quickly drew in investors.” Zuckerberg is betting that the metaverse will be the next generation of the internet because he thinks it’s going to be a big part of the digital economy. He expects people to start seeing Meta as a “metaverse company” in the coming years, rather than a social media company.” After reporting earnings, we can see that the model was overhyped as investors would still prefer growth over hope.  In the long run, the metaverse has the potential to reinvent the digital economy but this wasn’t enough to keep the shares afloat. Facebook also reported a decrease in monthly users, reporting 2.91 billion vs. analysts’ estimates of 2.95 billion. With rate hikes around the corner and Facebook showing a slow down in growth, it isn’t looking optimistic for the tech giant so far. For months the stock has been disconnected from its counterparties Google, Apple, and Microsoft.  

New investors & investors that have been patiently waiting for a purchasing opportunity, this may be one. With the stock hitting lows not seen since 2020, it is an optimal time to begin investing for the long term. Instagram and Facebook ads have been dominant throughout the pandemic and as we shift into a hybrid work-from-home/office lifestyle, it is likely the ads will continue to be their core source of revenue. Future earnings will likely be restructured to price in the hardware products they plan to release under their new name “Meta”.

Amazon is set to report its earnings tomorrow. Facebook is currently dragging the market down in after-hours trading and the pressure will be on tomorrow when the final pillar of the FAANG reports.