Apple stunts Meta's growth

From Lauren Feiner's "Facebook shares plunge more than 20% on weak earnings, big forecast miss" posted Wednesday on CNBC:

Facebook shares tumbled more than 20% in extended trading on Wednesday after the company reported disappointing earnings, gave weak guidance and said user growth has stagnated.

The company, which was recently renamed to Meta, issued disappointing guidance for the first quarter in addition to coming up short on its fourth-quarter profit and user numbers. Daily Active Users (DAUs) on Facebook were slightly down in the fourth quarter compared to the previous quarter, marking its first quarterly decline in DAUs on record.

Facebook said revenue in the first quarter will be $27 billion to $29 billion, while analysts were expecting sales of $30.15 billion, according to Refinitiv. That would mean 3% to 11% year-over-year growth, while analysts were expecting about 15%, according to Refinitiv.

Facebook said it’s being hit by a combination of factors, including privacy changes to Apple’s iOS and macroeconomic challenges. It blamed the lower-than-expected growth in part on inflation and supply chain issues that are impacting advertisers’ budgets.

My take: Isn't that a shame.

25 Comments

  1. Michael Goldfeder said:
    Zuck shut down his cryptocurrency “Libra” yesterday. It’s been a great week for privacy and personal decision making in the big tech world. Facebook and Spotify just can’t seem to get out of their own way. I’m grabbing a tissue!

    9
    February 2, 2022
    • Robert Paul Leitao said:
      @ Michael Because so much of Silicon Valley compensation is earned from stock-based compensation, for Meta it’s not just an issue of share price retrenchment, it becomes an issue of employee retention and the ability to deliver competitive employment packages for engineers and other highly skilled workers. This is not a time for a tech company’s share price to fall or trade sideways for an extended period of time. This may make Meta a less attractive place to work unless they can quickly reverse the downward trend on revenue and profit growth. The metaverse will be tens of billions of dollars of investment before the effort creates an opportunity for high rates of revenue and margin growth. No need to pass the tissue box. I’m good.

      6
      February 3, 2022
      • Michael Goldfeder said:
        @Robert: That $10 Billion hit is only the beginning. Privacy and giving the user the ability to opt out from tracking is going to cause even more pain for “Metaface” moving forward. Zuck ought to take a step back and rethink his next moves before engaging further with Apple. Tim Sweeney and Epic Games ought to have been the flashing neon light example like a scarecrow in the cornfield to Zuck and Sandberg.

        You’re correct about the stock incentives for those employees in the ESOP. It’s always been interesting to watch those CEO’s that bark the loudest like Zuck and Sweeney, in sharp contrast to those that just stay quiet and deliver like Tim Cook!

        BTW PED, Love the falling off a cliff chart!

        3
        February 3, 2022
        • Robert Paul Leitao said:
          @Michael FB reached an intra-day high of $382.76 on September 7th. It closed trading today at $323 and ended the AH session at $249.05. This is despite huge share repurchases in the most recent quarter. No. This isn’t about Apple. It’s about what Mr. Zuckerberg said after results were released, “Our path ahead is not perfectly defined.” It’s about a once fast growing enterprise that is gradually losing the interest of the platform’s users and its revenue generating advertisers without an effective remedy in sight.

          3
          February 3, 2022
          • Michael Goldfeder said:
            @Robert: So TikTok and YouTube must be drawing away users and it’s possible that Metaface is in the early demise much like “Myspace” back in the day. Toss in the App tracking opt out feature in iOS and its the perfect storm.

            OT, just saw on Bloomberg that iPhone sales in India were up 34%. That’s a nice start in that country.

            2
            February 3, 2022
  2. Fred Stein said:
    Libra was a mistake. I recommend anyone who thinks of investing in Meta to hear Zuke explain his vision. It’s on YouTube if you wish to waster 8 minutes.

    His vision is muddled and bears no resemblance to the business model for his Quest 2, which sells for cost and relies on 30% fees – same as Apple. He then goes on with a vision of totally free P2P sharing with no gatekeepers or moderation. So how does he make money? How are users protected?

    3
    February 2, 2022
  3. Jacob Feenstra said:
    If advertisers’ budgets are used as an excuse, why is Google doing just fine?

    4
    February 2, 2022
    • Robert Paul Leitao said:
      Jacob: That’s because search is a practical and often productive function. Meta’s platforms are digital entertainment in an increasingly crowded space.

      0
      February 3, 2022
  4. Fred Stein said:
    If and when Apple delivers 3D immersive devices and associated platform technologies, services etc., consider what Apple brings that Meta lacks:

    1B customers who already have 785 M paid subscriptions.
    20+ million developers.
    The software tools and services to support them – others can only dream.
    Silicon designs and manufacturing that others can only dream about.
    Trust – FB bought Oculus in 2014. What has been the experience for users, developers?

    Apple could bring an iPhone with dual cameras for 3D recording. Just speculating.

    2
    February 2, 2022
  5. Romeo A Esparrago Jr said:
    Why always blame Apple for your woes, Meta, Epic, Spotify, et al?
    Apple has dependencies, too, but they find ways, they innovate ways, to overcome them if those dependencies become problems. Look at tariffs. Covid. Supply Chain. Intel. Qualcomm. Samsung. Et al.
    Solve your problems like Apple solves theirs. By figuring it out yourselves. What’s wrong with you companies?

    17
    February 2, 2022
    • Dave Ryder said:
      @Romeo – Well said!

      3
      February 2, 2022
  6. Paul Brindze said:
    Meanwhile, since Mr. Market can not distinguish one tech company from another, we will probably be somewhat hit tomorrow, as FB drags all Nasdaq down.

    5
    February 2, 2022
    • David Emery said:
      NASDAQ futures down 2.14% at 8:00 PM.

      0
      February 2, 2022
  7. John Konopka said:
    That’s a humdinger of a rollercoaster ride. Down ~$200B in minutes!

    1
    February 2, 2022
  8. Mark Visnic said:
    … couldn’t have happened to a more loathsome CEO.

    5
    February 2, 2022
  9. Mark Visnic said:
    Greg and Joe, algos are blunt force instruments that trade index baskets off of headlines. They create opportunities that may be celebrated over the intermediate and long term even if it can be a frustrating effect in the short term.

    0
    February 2, 2022
    • Mark Visnic said:
      Here is a deeper description of algo impact by James Deporre:

      Computer algorithms have been pounding certain sectors of the market for months. Biotechnology, high PE-growth, ARK (ARKK) holdings, cannabis, various small-caps, and other secondary areas of the market have been under pressure while money rotated into many big-caps and indexes.

      The selling pressure relented started on Friday morning, which is why every single stock that I owned was positive on Monday. The computer algorithms work on the buy-side also, and they relented for a few days and allowed a nice lift in some of the worst stocks and sectors.

      The selling pressure is back on today. An easy way to see this is to look at a sector ETF like the SPDR S&P Biotech ETF (XBI) . XBI is currently trading down about 3%, but the tipoff that this is computer-generated pressure is that breadth with that ETF is 10 stocks advancing while 178 are declining.

      When breadth is 10 to 178 negative, it means the entire sector is being sold without any regard to the merits of individual stocks. This has nothing to do with stock picking. It is just sector flows, and for whatever reason, the computer programs decided to beat up on this sector.

      At some point this will reverse, and we’ll see action in the other direction, but right now it doesn’t much matter if you own the greatest biotech name in the world. If it is in the XBI, then it is likely being sold.

      The good news about this sort of action is that it does create some substantial mispricing. When the computers relent, it creates a great environment for stock pickers, but there is no easy way to know how hard the programs will continue to press.

      I am watching closely for opportunities to deploy more capital because when the algo pressure lifts, and we are likely to see extremely strong breadth to the upside.

      2
      February 2, 2022
  10. Bart Yee said:
    Hmm, down almost $70 in premarket trading, a loss of $166B in market cap. A lot of Money moving to the sidelines (joining NFLX money) or being redeployed to maybe Apple, Google or Microsoft if they are keeping it in tech.

    Should be a fun day for Meta trading today.

    4
    February 3, 2022

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