Meta reported a decrease in profits and user activity. The company's shares fell by 23%

Meta отчиталась о снижении прибыли и активности пользователей. Акции компании упали на 23%

2 February Meta Platforms, Facebook's parent company, reported for the fourth quarter 2021 of the year. Meta spoke about the fall in net profit, low user activity and future slowdown in revenue growth.

Problems with the advertising business and losses of the metaverse

Compared to the fourth quarter 2020 the company's revenue grew and was at the level of analysts' expectations, as opposed to profit:

  • revenue - 33,7 billion dollars (+20%), expectations - 33,4 billion dollars;
  • earnings per share - 3,67 $ (−5%), expectations - 3,84 $.

Facebook traffic was also weak and fell short of expectations.:

  • daily active users — 1,93 billion people (+5%), expectations - 1,95 billion people;
  • monthly active users — 2,91 billion people (+4%), expectations - 2,95 billion people.

And here is how revenue has changed in the two operating segments of the company.

Family of Apps - Facebook advertising, Instagram and WhatsApp — 32,8 billion dollars (+20%).
Meta's quarterly ad revenue grew much less compared to Google, who reported the day before: 20 against 33%.

According to the company, there are four reasons for this:

  1. A large number of services compete for user attention.
  2. Apple's New Privacy Policy Prevents User Activity Tracking and Relevant Ads.
  3. Users spend more time on lower-margin services like Reels, the Instagram-powered TikTok..
  4. Inflation and supply disruptions are holding back advertisers from spending more to promote their products..

In this regard, Meta gave a weak revenue forecast for the first quarter 2022 of the year: about 28 billion dollars against analysts' expectations in 30 billion dollars. As a result, revenue will increase by 7% compared to the first quarter 2021 of the year. For comparison: Over the past ten quarters, Meta's revenues have grown by an average of 30%.

Reality Labs — virtual reality headsets and a platform for the metaverse — 0,9 billion dollars (+22%).
IN 2021 Of the year, Meta decided to diversify its business and start developing a metaverse – a digital world, where several people can communicate at the same time, work and play.

According to the company, the full implementation of a new project can take up to 15 years. In the meantime, income from the metaverse is a very small fraction of total sales - 2,6%. But the division generates a tangible loss. For the quarter, this operating loss was 3,3 billion dollars, whereas the advertising business brought 15,9 billion dollars of operating profit.

  DRC - WTF ???

Here are the financial results of the Reality Labs segment over the past three years:

  • 2019: revenue - 0,5 billion dollars, operating loss — 4,5 billion dollars;
  • 2020: revenue - 1,1 billion dollars, operating loss — 6,6 billion dollars;
  • 2021: revenue - 2,3 billion dollars, operating loss — 10,2 billion dollars.

According to the company, in 2022 year investment in the metaverse will grow even more. Good news: advertising generates strong free cash flow, which in 2021 year grew by 67%, to 38 billion dollars. bad: the overall margin of the business is falling due to high costs. For example, in the fourth quarter 2021 year operating margin year-on-year decreased from year to year 46 to 37%, which had a negative effect on profits.

And that worries investors, especially against the backdrop of current problems with the core business. Following the report, Meta's shares fell by 23%, to January level 2021 of the year - 249 $. Shares of services earning on advertising also fell in price in the postmarket: Twitter — на 8%, Pinterest — на 9%, Snap — на 17%.

Meta отчиталась о снижении прибыли и активности пользователей. Акции компании упали на 23%

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