Investors in Meta are feeling nervous following the release of the company’s fourth quarter results which revealed a stall in profit.
Facebook’s owner suffered a 1 per cent decline in its operating profit to US$12.6 billion following a 38 per cent increase in costs driven by rising research and development, and marketing and sales spend.
However, it was Meta’s weaker-than-expected revenue forecast for this quarter that sent its stocks tumbling by over 20 per cent.
Namely, Meta announced that first quarter 2022 total revenue would likely be in the range of US$27 billion to US$29 billion, on the back of headwinds to both impression and price growth.
Commenting on the surprise results, Laura Hoy, equity analyst at Hargreaves Lansdown, said these have certainly interfered with Zuckerberg’s big picture plans.
“Meta CEO Mark Zuckerberg may be keen to coax the world into an alternate reality, but disappointing fourth quarter results were quick to burst his metaverse bubble,” Ms Hoy said.
“Investors were understandably troubled by the results, made worse by news that the current quarter was coming with a host of headwinds,” she noted.
Uncertainty about advertising budgets represents a major headwind, Ms Hoy said.
“Facebook depends on advertising revenue to support growth."
Research and development is another drain on incoming cash as the group looks for new ways to keep its users entertained and work around clever ad blockers.
“With total spend expected to rise at least 26 per cent in the year ahead, profit declines simply won’t cut it.
“Ultimately, investors give the social media stalwart a thumbs down and that negative sentiment was only amplified by existing tech-sector jitters. Facebook’s massive size and impressive reach coupled with a rock-solid balance sheet means there’s potential in the longer term, but the next year looks like it will be a bumpy, and expensive, ride,” Ms Hoy predicted.
As of 31 December, Meta had just shy of 72,000 employees, a 23 per cent increase.
An average of 2.91 billion people used the group’s platform Facebook, a slim 4 per cent growth year on year, but unchanged compared to the previous quarter.
Facebook had a net cash position of US$48 billion at the end of the year. Free cash flow rose from US$9.2 billion to US$12.6 billion, reflecting increased profits and lower spending.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
