9/10/2023 0 Comments Meta stock crashMeta is facing increased churn from Apple's ( AAPL) iOS privacy update enacted as part of iOS 14.0 which makes it harder for platforms and apps to track users through other apps and websites on their devices. Google’s YouTube ( GOOG) ( GOOGL) saw a decline in its advertising revenue as did Snapchat ( SNAP) delivering results that disappointed investors. Weak advertisement spending has not only impacted Meta but it’s also taken a toll on its competition. In 3Q22, Meta reported that the average price per ad decreased 18% Y/Y, compared to a 14% Y/Y decrease a quarter earlier. We believe a major factor in Meta’s decline has been weakening spending on advertisements. We don’t believe Meta is struggling alone competition is also feeling the pressure of the macroeconomic environment and weaker advertisement spending. Meta had a rough year, alongside most of the tech peer group. We recommend investors buy into the stock at current levels. We don’t believe Meta’s fundamentals have changed and expect the company to grow once macroeconomic headwinds ease. We believe Meta’s valuation is very attractive trading at 8.8x C2024 compared to the average peer group of 18.7x. We’re optimistic about Meta because we believe the market has reacted to the negatives and priced them into the stock for the most part. The company announced that it expects operating losses for its RL, which includes its metaverse. The stock fell, even more, when the company forecasted revenue and sales to drop even further in 4Q22. Net income also declined 52% over the same period. The 3Q22 earnings reported Meta’s revenue declined 4% year-over-year, making it the company’s second consecutive sequential decline. While Meta is part of the FAANG family and one of the best-base social media platforms, its 3Q22 was a disaster. The company has also ventured into the metaverse spending billions on its AR and VR experiences through its Reality Labs (RL). Meta is the parent of Facebook, Instagram, and WhatsApp through its Family of Apps (FOA). We believe Meta stock provides an attractive entry point for long-term investors. Yet, we believe the pullback has made Meta’s valuation extremely attractive for its position in the industry. We believe that market volatility and inflationary pressure hit Meta hard. In the first few days after launch, Threads soared to 100 million users, though it has since struggled to get all those users to return, according to estimates from web analytics firm SimilarWeb Ltd.We are bullish on Meta Platforms ( NASDAQ: META) despite missing expectations on revenue, ads coming in weak and investment losses in the metaverse in 3Q22. Instagram recently introduced a competitor to Twitter called Threads. “While Meta may be talking less about the metaverse these days, it is still determined to make the metaverse a reality, and the massive losses in its Reality Labs division are adding up,” Debra Aho Williamson, an analyst at Insider Intelligence Inc., said in a note. Meta said total expenses will be US$88 billion to US$91 billion in 2023, more than prior projections. The Reality Labs division, which is in charge of realizing Zuckerberg’s vision for the metaverse, will have “meaningfully” greater losses this year than it did last year, the company said, citing the costs of product development and growing the technology. The company is working to increase the amount of time each user spends on its networks while betting on new ventures. More than three billion people use at least one of Meta’s products every day, the company said, though its established social networks have continued to grow at a slower rate. This advertisement has not loaded yet, but your article continues below. Net income in the second quarter was US$7.8 billion, or US$2.98 per share, compared with the US$2.92-per-share average analyst estimate. Sales in the current quarter will be as much as US$34.5 billion, also topping average estimates. Meta reported second-quarter revenue rose 11 per cent to US$32 billion, compared with analysts’ average projections for US$31.1 billion. Even plans to increase spending over the next two years, as it invests heavily in strategic areas such as artificial intelligence and virtual reality, didn’t damp investor enthusiasm for the stock. Meta’s revenue could grow as much as 20 per cent in the current quarter, the company said on July 26.Īt the same time, Meta has been cutting thousands of jobs and teams in what chief executive Mark Zuckerberg calls its “year of efficiency,” putting the company on stronger footing with its shareholders. The format has succeeded in increasing usage and is now also helping draw advertisers, reigniting their spending after an industry-wide budget tightening in 2022. The company is betting on Reels - short-form videos that are similar to those on rival TikTok - to draw more attention to its social networks, Facebook and Instagram.
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