Facebook-owner Meta Platforms (FB:NASDAQ) saw its shares soar 18% in the after-hours trading market despite slowing revenue growth as the company reported better-than-expected daily active users and profit that beat expectations in its first quarter (to 31 March 2022).
The results clearly show the headwinds faced by Meta but there’s been a lot of negativity baked into the stock. This year the company has lost nearly half its value, the share price down 48% at $174.95 as of yesterday’s (27 Apr) close.
Investors were clearly relieved, with earnings coming in at $2.72 per share, beating the $2.56 expected by analysts. But let’s not get carried away; there’s still plenty for markets to mull, growth in particular.
Meta reported Q1 revenues of $27.91 billion, missing analyst forecasts of $28.2 billion, despite daily active users on Facebook beating expectations at 1.96 billion. And it gets bleaker.
WHERE DID THE GROWTH GO?
Meta gave revenue guidance for Q2 of $28 billion to $30 billion, trailing the $30.7 billion average analyst estimate, according to Koyfin data. The middle of that range, revenue would drop from the second quarter of 2021, when sales came in at $29.1 billion.
That forecast follows year-on-year growth of just 7% in the first quarter, the slowest pace of expansion in Facebook’s 10-year history as a public company. A year ago, Facebook was growing by around 50% from a big post-pandemic boom as the economy reopened.
Founder and chief executive Mark Zuckerberg told analysts that users’ focus on short-term videos is acting as a ‘drag on revenue,’ because they don’t monetise as well as traditional ad services. More broadly, the company is dealing with privacy changes on Apple’s iOS and ‘softness in e-commerce after the acceleration we saw during the pandemic,’ said Zuckerberg.
Like Snap and Google, Facebook also is being hit by Russia’s invasion of Ukraine, with ad revenue from Russia drying up, as you might expect.
