To say this earnings season has been unforgiving would be an understatement. Over the past month, Tech Giants have been tested by investors as the outlook for 2022 remains in the balance. Meta Platforms Stock (formerly known as Facebook) is being hammered in after market trading as Facebook saw no growth in Daily Users for the quarter.
While 2.91 Billion People is by far the most users on any platform to date, Facebook’s growth is beginning to plateau as other social media platforms such as TikTok and Youtube continue to dominate.
In addition, the Meta Platform CFO also sees revenues shrinking in Q1 to $27-29 billion (a 17.5%-12% decrease QoQ). Currently, Meta Platforms Stock (NASDAQ:FB) is trading 22% lower after market while Snap Stock (NYSE:SNAP) is trading 15% lower.
So is the market overreacting? This article will breakdown everything you need to know about Meta Platforms Stock following its Q4 performance.
Meta Platforms Stock: What are investors concerned about?
The Meta Stock Sell-off after market hours is just another example of the unforgiving market conditions in 2022. We saw earlier this year, Netflix Stock lose $55 Billion in market cap following bleak guidance from Netflix executives.
In similar fashion, investors are concerned about the performance of Meta Platforms in 2022. For the first time Facebook saw negative quarterly growth in daily users. The sluggish growth in users was put down to increasing competition from TikTok as well as Apple’s privacy changes.
Secondly, the company is expected to take on more costs in 2022. Meta expect 2022 total expenses to be in the range of $90-95 billion, slightly better than their previous forecast last year. However, the companies expense growth year on year is driven by investments in technical and product talent and infrastructure-related costs.
As we discussed in our previous article, the company is investing heavily into the metaverse. The Metaverse is not a small project, and its development is going to hinder capital expenditures and profitability over the next 5-10 years.
How Did Wallstreet React to Meta Platforms Q4 earnings?
This morning, multiple analysts updated their forecasts for Meta Platform stock following the Q4 earnings.
JPMorgan analyst Doug Anmuth downgraded Meta Platforms Stock to Neutral with a new price target of $284, down from $385. The analyst noted that Meta is seeing a “significant slowdown” in advertising growth while its Metaverse developments continue to bear added expense to the investor.
As we noted, the analyst also highlighted TikTok competition and the Apple iOS changes as key downsides to Meta Platform Stock in 2022.
Credit Suisse analyst Stephen Ju also lowered his Meta Platforms Stock target to $336 from $430 following quarterly results. However, Ju maintains an Outperform rating on Meta Stock, noting the long-term monetization potential of Messenger and WhatsApp as key catalysts. Assuming Meta Platforms opens up at $250, the Credit Suisse target implies a 34% upside despite lowered guidance.
The Bottom Line: Why investors are selling Meta Platform Stock Following its Q4 earnings
In summary, the 22% sell-off on Meta Stock can be put down to both an unforgiving earnings season alongside weak Meta guidance and user growth. In addition, the mounting costs of building the metaverse will continue to bear down on the companies bottom line.
However, this is not breaking news to investors as Meta Platforms disclosed increased costings over the next 5-10 years in pursuing the creation and development of a Metaverse.
To conclude, with the current market conditions its clear why Meta Platforms may exceed the risk some investors can tolerate. The “Metaverse” project pursued by Facebook is a highly debated topic, and its potential value ultimately comes down to whether investors see the Meta as a long term play.
What do you think about Meta Platforms Q4 earnings? Do you see the Metaverse paying offf in the long term? Let us know in the comment section below.
Follow us on Google News here to get minute-by-minute updates on when we post on any device via the Google News App.
The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.