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Feb 2, 2022 - Economy & Business

Meta stock plunges in response to weak growth forecasts

Sara Fischer

Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images

Shares for Meta, Facebook's parent company were down roughly 20% in after-hours trading on Wednesday in response to weak earnings and growth forecasts. Most notably, the daily active user count for Facebook declined by roughly 1 million compared to last quarter.

Why it matters: The earnings miss proves the vulnerability of its business model being tied to advertising against social networking, as opposed to search.

  • It also shows how much the company is being impacted by competitors like TikTok.

Be smart: Google parent Alphabet posted a huge earnings beat Tuesday, mostly tied to growth of search-based advertising, as well as advertising on YouTube.

  • Facebook's ad model makes it uniquely vulnerable to privacy changes made by competitors like Apple.

Details: In a statement, the company said revenue growth for the first quarter could be as low as 3%. It said it expects its year-over-year growth in the first quarter "to be impacted by headwinds to both impression and price growth."

  • It expects "continued headwinds" from increased competition for people's time and "a shift of engagement" within its apps towards video products like Reels, which are harder to monetize compared to other video products in the News Feed and in Stories (strings of video and text.)
  • It also anticipates modest headwinds from "platform and regulatory changes," like the changes to Apple's app tracking privacy features.

What to watch: The company for the first time broke out numbers for its AR/VR segment called "Reality Labs," which includes augmented and virtual reality related consumer hardware, software and content.

  • The company said it made over $2 billion from its Reality Labs segment in 2021.
  • The company warned last year that investments in Facebook Reality Labs would reduce its overall operating profit by roughly $10 billion in 2021.

By the numbers, via CNBC:

  • Earnings per share: $3.67 vs $3.84 expected by Refinitiv
  • Revenue: $33.67 billion vs $33.4 billion expected by Refinitiv
  • Daily Active Users (DAUs): 1.93 billion vs 1.95 billion expected, per StreetAccount
  • Monthly Active Users (MAUs): 2.91 billion vs 2.95 billion expected, per StreetAccount
  • Average Revenue per User (ARPU): $11.38 expected, per StreetAccount
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