⚡ Meta Platforms before earnings report. Will Zuckerberg’s company exceed Wall Street expectations?

Today, after the US trading session, Meta Platforms ( META.US ) will report its fourth quarter 2022 and full year 2022 results as the Silicon Valley giants start their earnings season. Analysts expect the company to post its third consecutive quarter of sales declines and a weak first quarter of 2023. Will Mark Zuckerberg be able to improve sentiment on Wall Street?

Revenue: $31.5 billion in Q3 2021 vs $27.71 billion and $33.67 billion

Earnings per share: $2.26 vs. $1.64 and $4.64 in Q3 2021

Active users (monthly): 2.980 billion forecast in Q3 2022 vs. 2.960 billion

The 2022 ad recession has become a reality and hit Meta’s business model, but given the low risks of global “disinflation” and (so far) deep recession, bulls expect the company to deliver a better and more complete forecast for the first quarter . 2023. A red flag for meta performance, however, could be surprisingly weak results from Snap ( SNAP.US ) after the digital ad company lost almost 15% before the open. Investors hope that Meta will begin to manage costs more sensibly, especially with its Reality Labs division, whose work has so far caused billions of dollars in losses for the company.

Four of Meta’s last five reporting releases have delivered disappointing earnings per share (EPS). Source: Benzinga

Advertising matters

• According to Refinitiv, ad companies will only see revenue increase in the second half of the year, while Meta will see its biggest revenue decline to date. Revenues are expected to decline another 2.8% in the first quarter of 2023 as a weakening economy weighs on advertising budgets;
• A Cowen Fund survey showed that ad spending will grow by 3.3% in 2023 (the lowest estimate in five years, up from 7.5% in 2022), with two-thirds of ad buyers seeing budget cuts and weaker consumers. This suggests that Meta’s valuation could be pushed lower even without a deep recession;
• As Apple has enabled blocking of ad personalization, Meta has enhanced its ad technology with AI. Some retailers have reported migrating their data to Meta, which has benefited their business. Opportunities to improve advertising revenue were also identified by Insider Intelligence analysts;
• Although TikTok is growing faster, the strong impact makes Meta a winner if the economy improves. Cowen analysts expect the Chinese platform to attract 8% of market ad budgets in 2024, up from 6% in 2023, and remain the main share gainer in the digital advertising sector, limiting Meta’s potential.

Reduced costs

• In the third quarter, revenues fell 4% year-on-year, while expenses rose 19%. This combination is not a good sign, especially if it lasts longer. However, sentiment could improve if Mark Zuckerberg presents evidence that the company’s revenue decline has ended in 2022 and that costs are indeed under control;
• The company cut 11,000 jobs in the third quarter of 2022, but a recent interview with Zuckerberg indicated another wave of layoffs could be in store for 2023. According to the CEO, too many managers hinder business operations. The need to further reduce costs was also highlighted by Chris Cox, Meta’s product manager at CommandLine. It appears the company is poised to cut costs further in all business areas except Reality Labs.

Metaverse … Trojan horse or rescue?

• It seems difficult to report lower costs on Metaverse. Zuckerberg has said in the past that this will only increase. The company sees this concept as an opportunity to create a technology product that will provide a strong user base and an entirely new revenue stream to expand its operations;
• The company still depends on competitors like Apple or Google. For example, the iOS hit Ads Personalization (ATT) caused Meta’s estimated losses around 2022. 10 billion dollars;
• Creating its own tech space would free Meta from constraints and stimulate demand for its own VR/AR products like Oculus, Quest, or gaming platforms like Horizon Worlds. However, the company chose a difficult time to implement the concept. The prospect of rising costs with negative revenue from Reality Labs made Meta’s stock risky.

Meta Platforms (META.US), interval D1. The price hit key resistance at $152 per share (SMA200). Meta’s results could affect the share price of other companies in the ad market, including Alphabet ( GOOGL.US ) and Snap ( SNAP.US ). The earnings forecast is more likely to be in the lower range of Meta’s estimates (30-35 billion in revenue) released after the 2022 Q3 report. Source: xStation5

“This material is a marketing communication within the meaning of Article 24(3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and Directive 2002/92/EC and amending the Directive. 2011/61/EU (MiFID II) Marketing communication is not investment advice or information within the meaning of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 recommending or offering an investment strategy. market abuse (Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and Council Directives 2003/124/EC, 2003/125/EC and 2004/72/EC of the Commission and Delegated Regulations of the Commission (EU ) in addition to Regulation (EU) 2016/958 of the European Parliament and of the Council No. 596/2014 of March 9, 2016, recommending or proposing investment recommendations or investment strategies related to regulatory methods for technical methods of objective presentation of standards that does, for the disclosure of signs of special interests or conflicts of interest, or other information within the meaning of the law of July 29, 2005 on financial trading in the field of other advice, including investment advice. tools. (ie Laws Journal 2019, section 875, as amended). All information, analysis and training provided are for informational purposes only and should not be construed as advice, recommendation, investment offer or invitation to buy or sell financial products. XTB cannot be held responsible for its use and the resulting consequences, the end investor remains the sole decision-maker regarding the position held in his XTB trading account. Any use of said information and any decision made regarding the possible purchase or sale of CFDs in this respect is solely the responsibility of the end investor. Reproduction or distribution of all or part of this information for commercial or personal purposes is strictly prohibited. Past performance is not necessarily indicative of future results and anyone acting on this information does so entirely at their own risk. CFDs are complex instruments and there is a high risk of losing capital quickly due to leverage. 82% of retail investor accounts lose money when trading CFDs with this provider. You need to make sure you understand how CFDs work and how you can afford to risk losing your money. With a Limited Risk Account, the risk of loss is limited to the invested capital.