Facebook's Meta Platforms (FB) Stock Crashes Over 20% on Profit and Outlook Miss, Analysts Lower Ratings and Numbers But Remain Long-Term Positive
Shares of Meta Platforms (NASDAQ: FB) are down over 20% in early Thursday trading after the social media company reported worse-than-expected Q4 2021 earnings numbers and a slowdown in user growth, as well as weak guidance.
Facebook’s parent company reported EPS of $3.67, missing the consensus estimates of $3.84, according to Refinitiv. Revenue came in at $33.67 billion, compared to the analyst consensus of $33.4 billion.
Facebook reported the number of Daily Active Users (DAUs) was 1.93 billion, short of the 1.95 billion consensus. Monthly Active Users (MAUs) stood at 2.91 billion, compared to consensus estimates of 2.95 billion. Furthermore, Average Revenue per User (ARPU) also missed expectations, with Meta reporting $11.57, missing the $11.38 consensus.
In addition to disappointing Q4 numbers, Meta also issued weaker-than-expected guidance for Q1 2022. The tech giant expects Q1 2022 revenue to range between $27 billion and $29 billion, while analysts were projecting $30.15 billion, according to Refinitiv.
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.
Meta’s Family of Apps, which include Whatsapp, Instagram, Facebook and others, generated $32.79 billion in revenue in the quarter while operating income was at $15.89 billion. Reality Labs segment reported $877 billion in revenue in the quarter, including an operating loss of $3.3 billion.
The company’s commentary also didn’t help assure investors that headwinds are transitory.
“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” Meta Platforms said in a statement.
At least two Street analysts downgraded Facebook following earnings. Raymond James analyst Aaron Kessler downgraded to Outperform from Strong Buy and cut the price target to $340.00 per share from the prior $410.00.
“We lower our rating to Outperform (from Strong Buy) given slowing advertising revenue outlook… We expect ad growth to bottom in 2Q and reaccelerate modestly in 2H22. Given the slowing growth outlook and high expense levels in 2022 (particularly on Reality Labs investments), we are moving to an Outperform (from Strong Buy). We believe shares remain attractive at ~13x core FB EPS (ex Reality Labs) vs. 10%+ LT EPS growth (based on AH price of ~$250). We maintain our positive view on shares given: 1) we continue to expect solid long-term ad growth of 10% plus; 2) expect continued monetization of newer platforms and formats (e.g. Reels); and 3) we believe after hours valuation is attractive at ~13x our 2022E Core EPS (ex Reality Labs) vs. mid-teens LT EPS growth,” Kessler said in a client note.
Other analysts also lowered price targets but remained mostly Buy-rated as they see headwinds as temporary.
Truist analyst Youssef Squali lowered the price target to $350.00 per share from the prior $400.00 but remains generally constructive on FB.
“We remain constructive on FB recognizing that ongoing headwinds from iOS changes in 1H22, growing shift in engagement to Reels (which currently monetizes lower) and the emergence of TikTok as a major competitor will pressure growth and margins in 2022. Like with Mobile in 2012 and Stories in 2017, we expect FB to reinvent itself through product innovation leveraging its massive scale and BS to reposition itself as a major player in the fast growing SF video, while further building commerce and metaverse as key pillars to engage younger audiences. We believe patient investors will get rewarded,” Squali wrote in his report.
By Senad Karaahmetovic | [email protected]