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Where’s Meta Platforms (META) headed after weak Q3 report



Meta Platforms Q3 2022 earnings infographic


Meta Platforms, Inc. (NASDAQ:META), the parent company of popular social media platform Facebook, is poised to bring the next wave of digital revolution by creating the Metaverse. Lately, the company has seen slowing sales growth amid declining corporate spending on digital advertising.

The tech company’s unimpressive third-quarter numbers sparked a selloff, and the stock slipped below $100 last week. Management’s cautious fourth-quarter revenue outlook, reflecting falling advertising demand globally, contributed to the 25% decline in valuation. META has been in freefall since its peak over a year ago.

stock falls

Investor sentiment is being hit hard by the prolonged downturn, catalyzed by the tech selloff, and the stock is currently trading at its lowest level in about seven years. Experts believe the stock would recover most of the recent losses over the 12-month period. The bullish outlook should cheer those looking to buy the current decline. As a social media market leader with a successful business model, the company’s long-term growth prospects remain intact.

Read management/analyst comments on quarterly results

The good thing about the decline is that the valuation has become attractive. Advertising revenue accounts for the lion’s share of Meta’s revenue, and the company generates enough revenue to remain comfortably profitable, despite weak advertising demand. With approximately three billion daily active users, it continues to be the largest social media company.

Meta Platforms Third Quarter 2022 Earnings Infographic

Invest in META

While betting on the powerful Facebook brand, potential buyers must also weigh the uncertainties facing the company and the wider market. The disappointing market response to Meta’s transition from a social media company to a metaverse platform shows that investors are skeptical of the change in organizational structure. The move is gaining prominence given the fierce competition posed by other players like Tik-Tok.

After the historic rebranding, management is currently taking steps to streamline the business, such as a careful review of operating expenses. Meanwhile, cash flow could come under pressure from business investments and initiatives such as office footprint rationalization.

Excerpt from Meta Platform’s Third Quarter 2022 Earnings Call:

“One of the things we’ve talked about this quarter is some of the new advertising tools that we’ve rolled out, the Advantage+ suite of advertising tools. We’ve started those especially with the e-commerce and retail verticals, specifically the Advantage+ shopping tool that we’ve launched, which basically gives advertisers of, A, easy access to many disparate features of our product and then, B, use some kind of new machine learning on technology.

Key numbers

Meta earnings have missed consensus estimates for two consecutive quarters, marking a deviation from the long-term trend of steady beats. In Q3 2022, earnings fell sharply to $1.64 per share, hurt by a 4% drop in advertising revenue to around $27 billion. The company had 2.96 billion monthly active users at the end of the quarter.

Earnings Infographic: Microsoft Q1 Revenue Up 11%; earnings beat

Meta shares are among the hardest hit by the market downturn and macroeconomic uncertainties. The stock, which has lost around 71% so far this year, traded higher on Tuesday afternoon.