Facebook shares plunge on weaker earnings and poor forecast
03 February, 2022
Shares of Facebook’s parent company Meta dropped by more than 20 per cent to $246.53 from $323.00 in after-hours trading on Wednesday after the company reported weaker-than-expected earnings and future forecast.
The California-based social networking company’s net profit dropped more than 8 per cent year-on-year in the fourth quarter. It nosedived to $10.2 billion in the three months to December 31, but was almost 11 per cent up on quarterly basis.
Revenue during the period soared 20 per cent to more than $33.6bn, marginally exceeding analysts’ estimates of $33.4bn.
The company’s 2021 full financial year net profit jumped nearly 35 per cent to more than $39.4bn, while sales jumped 37 per cent to $117.9bn. “We had a solid quarter as people turned to our products to stay connected and businesses continued to use our services to grow,” Meta founder and chief executive Mark Zuckerberg said.
“I am encouraged by the progress we made this past year in a number of important growth areas like reels, commerce and virtual reality … we will continue investing in these and other key priorities in 2022 as we work towards building the metaverse,” Mr Zuckerberg said.
The company’s earnings per share dropped 5 per cent annually to $3.6, missing the expectations of $3.8.
In the last quarter, advertisement impressions delivered across Facebook’s family of apps increased by 13 per cent year-on-year and the average price per advertisement rose by 6 per cent annually. For the full financial year, advertisement impressions surged by 10 per cent and the average price per advertisement increased by 24 per cent, the company said.
Meta’s family of apps includes Facebook, Instagram, Messenger, WhatsApp and other services.
The company's advertising sales contributed more than 96 per cent to the overall sales in the fourth quarter. It increased nearly 20 per cent on an annual basis to more than $32.6bn in the September-December period.
Revenue from other streams — including reality labs — rose 16.6 per cent on an annual basis to more than $1bn.
The company’s reality labs include augmented and virtual reality-related consumer hardware, software and content.
Meta, which employs 71,970 people, expects its first quarter 2022 total sales to be in the range of $27bn to $29bn, which represents 3 per cent to 11 per cent annual growth, below analysts' expectations.
The company expects its year-on-year growth in the January-March period to be affected by “headwinds to both impression and price growth”.
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 monetise at lower rates than feed and stories,” Meta’s chief financial officer David Wehner said.
“On the pricing side, Meta expects growth to be negatively impacted by various factors.
“First, we will lap a period in which Apple's iOS changes were not in effect and we anticipate modestly increasing ad targeting and measurement headwinds from platform and regulatory changes.
“Second, we will lap a period of strong demand in the prior year and we're hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets.”
Apple’s update to its operating system is intended to make it harder for advertisers to track people as they rotate between different apps on their device.
Users are given the choice to opt in or out of app tracking. This will restrict how technology companies such as Facebook and Google gather data for advertising purposes.
Facebook's daily active user base grew 5 per cent on an annualised basis to reach more than 1.93 billion in the previous quarter. Its monthly active users increased 4 per cent yearly to 2.91 billion.
The platform's capital expenditures, including principal payments on finance leases, were $5.5bn and $19.2bn for the fourth quarter and full year 2021, respectively.
It is expected to be in the range of $29bn to $34bn for the 2022 full financial year, driven by the company’s investments in data centres, servers, network infrastructure and new office facilities.
“This [capex] range reflects a significant increase in our artificial intelligence and machine learning investments, which will support a number of areas across our family of apps,” Mr Wehner said.
Meta said while its reality labs products may require more infrastructure capacity in the future, they do not require substantial capacity today and, as a result, are not a significant driver of 2022 capex.
The company repurchased $19.2bn and $44.8bn of its common stock in the fourth quarter and January-December period, respectively. As of December 31, it had $38.8bn available and authorised for the repurchases, Meta said.
Facebook’s cash, cash equivalents and marketable securities dropped 22 per cent to $48bn at the end of last year.
Source: www.thenationalnews.com
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