Shares of Facebook parent Meta Platforms Inc. plunged more than 20% in extended trading Wednesday on an earnings miss, weak guidance and intensifying competition — dragging down the stocks of other social media giants.
The company formerly known as Facebook reported fourth-quarter earnings of $10.3 billion, or $3.67 a share, topping the $3.88 a share it reported last year, on sales of $33.67 billion, up from $28.1 billion a year ago. Earnings fell short of the average forecast for profit of $3.85 a share but not on sales, which was $33.4 billion, according to analysts polled by FactSet. [Meta finished the fiscal year with revenue of more than $100 billion for the first time.]
Meta also missed in its first-quarter revenue forecast, which calls for sales of $27 billion to $29 billion, while analysts were forecasting $30.2 billion. “On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” the company said in a statement.
With Meta’s shares in freefall, other social-media stocks were badly bruised. Snap Inc.’s SNAP,
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In Meta’s first results since the former Facebook changed its name in late October to reflect its pursuit of “metaverse” technology, the company cautioned it expects to be “negatively impacted by a few factors… First, we will lap a period in which Apple’s iOS changes were not in effect and we anticipate modestly increasing ad targeting and measurement headwinds from platform and regulatory changes.” Chief Operating Officer Sheryl Sandberg referred to “head winds” associated with Apple’s changes during a conference call late Wednesday.
During the same conference call, Meta Chief Executive Mark Zuckerberg acknowledged competition from TikTok. “People have a lot of choices,” he said, necessitating short-term videos from Reels as a critical component in Meta’s future growth, he added.
Meta Chief Financial Officer David Wehner estimated the Apple “head wind” will cost Meta an estimated $10 billion in 2022, when pressed by an analyst during the call.
For more than a year, Meta has repeatedly denounced the impact of Apple Inc.’s AAPL,
“It’s clear that there are many big roadblocks ahead as Meta faces tough new competition for ad revenue such as TikTok, and as it contends with ongoing ad targeting and measurement challenges from Apple’s iOS changes,” Insider Intelligence principal analyst Debra Aho Williamson said in an email message.
The results, on the heel of blockbuster numbers from Google parent Alphabet Inc. GOOGL,
Daily active users, or DAUs, a crucial metric for Meta’s growth globally, increased 5% to 1.93 billion, shy of analyst expectations of 1.95 billion. However, the actual number of DAUs has been met with skepticism after internal documents strongly suggest Meta is struggling to detect and deal with users creating multiple accounts on its flagship platform.
Meta shares have slipped 4% so far this year, while the broader S&P 500 index SPX has dipped 3.7% in 2022.
