Facebook owner Meta’s stock plummets. What’s happening? – National

Facebook parent Meta Platforms Inc on Wednesday forecast a weak holiday quarter and significantly higher expenses for next year, sending shares down more than 20 percent as investors expressed skepticism about the company’s expensive Metaverse bets.

The forecast has reduced Meta’s stock market value by about $67 billion in extended trading, adding to more than half a trillion dollars already lost this year, the deepest one-day loss since Feb. 2, when the company recently issued a gloomy forecast.

The disappointing outlook comes as Meta grapples with slowing global economic growth, competition from TikTok, privacy changes from Apple, concerns about massive spending on the Metaverse, and the ever-present threat of regulation.

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Executives announced plans to consolidate offices and said Meta will keep headcount constant through the end of 2023.

Revenue for the third quarter ended September 30 fell four percent. That deepened a revenue decline that began in the prior quarter, when the company first reported a 0.9 percent drop in revenue, though it was less severe than the 5.6 percent decline Wall Street had been expecting, according to Refinitiv’s IBES data.

Of even more concern was the company’s estimate that fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, according to data from Refinitiv, mostly below analysts’ estimate of $32.2 billion would.

Meta also forecast that total spending for full-year 2023 would be $96 billion to $101 billion, which would be significantly higher than a revised 2022 estimate of $85 billion to $87 billion.

This includes an estimated $2.9 billion in costs over 2022 and 2023 from office downsizing.

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It also predicted that operating losses related to the Reality Labs unit responsible for its Metaverse investments would increase in 2023 and vowed to “accelerate” investments thereafter.

Total expenses for the third quarter were $22.1 billion, ahead of estimates compared to $18.6 billion a year earlier.

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Meta is making multiple overhauls to its apps and ad products to keep its core business profitable, while investing $10 billion a year in a bet on Metaverse hardware and software.

Chief Executive Mark Zuckerberg said he expects the Metaverse investments to take about a decade to bear fruit. In the meantime, he’s had to freeze hiring, close projects, and reorganize teams to cut costs.

An analyst at the investor call said Zuckerberg’s investors were concerned that the company was making “just too many experimental bets,” and asked the CEO why he thought his bets were paying off.

Meta executives defended the spending, saying most of the company’s spending still goes toward its core business, including investments in more expensive AI-related servers, infrastructure and data centers.

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Zuckerberg added that he expects the Metaverse work to yield returns over time.

“I appreciate the patience,” he said. “And I think those who are patient and invest in us will be rewarded in the end.”

Zuckerberg said that views of Meta’s TikTok-like short video product, Reels, now top 140 billion each day on Facebook and Instagram, up 50 percent from six months ago, and annual revenue is now $3 billion.

He believes Reels is gaining ground over rival TikTok, he added, as Reels are re-shared more than 1 billion times a day.

Meta also released user growth numbers that were roughly in line with expectations, including a year-over-year increase in monthly active users for flagship app Facebook.

“The concern for Meta is that this pain is likely to continue into 2023 as cost headwinds remain a real challenge and the dollar’s strong impact on earnings overseas,” said Ben Barringer, equity research analyst at Quilter Cheviot.

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“With revenue declining at a time when costs have increased significantly, modest user growth and impressions just won’t save you.”

Net income fell to $4.40 billion, or $1.64 per share, in the third quarter from $9.19 billion, or $3.22 per share, a year earlier, its worst result since 2019 and fourth consecutive quarter of earnings decline.

Analysts had expected earnings of $1.86 per share. Facebook owner Meta’s stock plummets. What’s happening? – National

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