Meta Platforms seeks soft earnings landing after disastrous last outing
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Alphabet saw a slowdown in its YouTube advertising growth in part due to macro pressures and the war in Ukraine. Can Facebook parent Meta Platforms (NASDAQ:FB) avoid the ad downdraft?
It's up next, with its latest earnings report coming after the closing bell Wednesday, and the company looks to clear a lower bar after guiding to lighter revenues this quarter. That's led analysts to cut back in kind, with 15 downward revisions to earnings per share estimates and a full 26 cuts to expectations for revenue.
Wall Street is forecasting a near-24% decline in earnings per share, to $2.51, with revenues expected to grow at their slowest rate in three years: just 7.8%, to $28.22 billion.
Meta broke a six-quarter streak of beating expectations on top and bottom lines in the third quarter, when it missed revenue consensus - and then in Q4 it missed on net earnings estimates, leading to a next-day decline of 26.4%, the biggest single-day equity value wipeout ever.
Things haven't gone much better since, as since that one-day wipeout, the stock is down another 24%. That's come as the company continues to wrestle with Apple's new privacy approach that limits tracking users (last quarter, CFO Dave Wehner said the changes would cost Meta $10 billion in ad revenue this year).
One area of focus for investors will be the user numbers. Last quarter, daily active users that rose 5% to 1.93 billion disappointed, as did monthly active users that were up 4% to 2.91 billion. Now, its monthly active people metric will give an idea of the company's user base across its entire family of products - including Instagram and WhatsApp rather than just Facebook and Messenger. Last quarter, monthly active people rose 9% to 3.59 billion.
Another thing to watch for is any detail on monetizing Reels, its short-form video product, as its last earnings call finally highlighted the "TikTok in the room" (BDNCE) as a growing threat to Meta's hold on user attention.
At least two analysts who have previewed earnings season in the digital advertising space see more tough times ahead for Meta. KeyBanc suggested that new macro pressures (including advertising impact from war) and high inflation would stress ad budgets, and more diversified names would benefit, while e-commerce end product will be a headwind for Meta.
Last week MKM Partners also highlighted macro worries and slashed its price target for Meta to $315 from $365.