Shares of Meta Platforms, Inc. (FB), the parent company of Facebook, plunged 26.39% or $85.24 to close Thursday’s trading session at $237.76 after the social media platform provider reported lower-than-anticipated fiscal 2021 fourth-quarter earnings.
Revenues surpassed Wall Street estimates. Worrisomely, Facebook also reported a decline in daily active users for the first time in its 18-year history. The company also issued lower-than-expected revenue guidance for 1Q 2022. More importantly, Facebook also acknowledged that it was facing headwinds from Apple’s privacy changes. Following the poor results, the market value of Meta got eroded by $200 billion.
Menlo Park, California-based Meta reported fourth-quarter 2021 revenues of $33.67 billion, up 20% from $28.07 billion in the similar period last year. Analysts surveyed by Refinitiv had anticipated the company to report revenues of $33.41 billion for the reported quarter.
For the quarter ended December 31, 2021, the company recorded earnings of $10.29 billion, or $3.67 per share, down 8% from $11.22 billion, or $3.88 a share, on December 31, 2020. Analysts surveyed by Refinitiv had anticipated the company to post earnings of $3.84 per share for the quarter.
Commenting on the results, Mark Zuckerberg, Meta founder and CEO, said, “We had a solid quarter as people turned to our products to stay connected and businesses continued to use our services to grow. “
The firm’s primary social media operations, dubbed Family of Apps, generated sales of $32.79 billion and $15.89 billion in operating income during the quarter.
Furthermore, daily active users (DAU) rose by 5% y-o-y to 1.93 billion in December, while monthly active users (MAU) grew by 4% to 2.91 billion.
However, the slight decline in daily active users to 1.929 billion in 4Q 2021, from 1.93 billion in the earlier quarter, shook the market. Analysts believe that the platform is increasingly losing relevance among youngsters.
During the fourth quarter, ad impressions delivered across the company’s bouquet of apps rose by 13% on a y-o-y basis. Correspondingly, the average price per ad grew by 6% year on year.
Apple’s iPhone privacy tweaks, which affect its targeted marketing and tracking, are expected to cost the corporation $10 billion in sales this year. Additionally, it said that macroeconomic headwinds such as surging inflation and supply chain issues are putting a strain on allocation for advertisements.
For the first time, Meta spoke about its Reality Labs division, which is focused on developing the metaverse.
The sector generated $877 million in sales during the fourth quarter, but recorded an operational loss of $3.3 billion. The company recorded a loss of $10.20 billion in its augmented reality (AR) and virtual reality (VR) division in FY21, up from a $6.6 billion loss in the prior-year period. Also, in 2021, Reality Labs generated around $2.3 billion in sales.
Looking ahead, for the current quarter (1Q 2022), Facebook anticipates revenues of between $27 billion and $29 billion, lower than the consensus estimate of $30.15 billion. Facebook further stated that it anticipates first-quarter growth (y-o-y basis) to be affected by sluggishness in price growth and also impressions.
The decline in daily active users on a q-o-q basis and weak 1Q 2022 revenue guidance is expected to keep the stock of Meta bearish in the short term.
The historical price chart indicates that the stock of Meta is declining after facing resistance at 240. The next major support is anticipated only near 210. Additionally, the stock is trading below its 50-day moving average while the MACD indicator has a negative reading. Therefore, we are anticipating the stock to remain in a downtrend in the days ahead.
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