Meta Platforms
META
is set to report
second-quarter 2022 results
on Jul 27.
Meta expects total revenues between $28 billion and $30 billion for the second quarter of 2022.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $28.82 billion, indicating a decrease of 0.87% from the year-ago quarter’s reported figure.
The consensus mark for second-quarter earnings stands at $2.51 per share, which has remained unchanged over the past 30 days, suggesting a decline of 30.47% from the figure reported in the year-ago quarter.
The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 5.99%.
Meta Platforms, Inc. Price and EPS Surprise
Meta Platforms, Inc. price-eps-surprise
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Meta Platforms, Inc. Quote
Factors to Note
Meta’s Family of Apps — Facebook, Instagram, Messenger and WhatsApp — has been facing significant competition from the likes of TikTok and
Snap
SNAP
in the ad dollar space. Meta’s competition with
Twitter
TWTR
in the NFT space has also been intensifying.
Also, Instagram and Facebook’s ban in Russia is expected to have negatively impacted user as well as advertising revenue growth in the to-be-reported quarter. It is worth mentioning that Russia accounted for 1.5% of Meta’s advertising dollars.
Snap’s flagship platform, Snapchat, reaches 75% of the 13-34-year-old population of the United States, making it a more popular platform than Meta’s Facebook and Instagram in this demography.
These factors are likely to have hurt Meta’s year-over-year advertising revenue growth rate in second-quarter 2022.
Meta has been beaten by Twitter as the first social media giant to enter the NFT marketplace by launching a tool to showcase and sell NFTs on its platform.
META is currently facing the worst downturn in the company’s history due to the global macro-economic situation, geopolitical tensions, rising inflation and U.S. Federal Reserve interest rate hikes.
Rising inflation is likely to have impacted the ad spending revenues of enterprises negatively, which in turn might have weighed on the ad revenues of Meta in the to-be-reported quarter. In the first quarter of 2022, Meta’s ad revenues represented 99.2% of total revenues and were used to fund the company’s Reality Labs initiatives, which may have taken a severe hit in the to-be-reported quarter.
Changes made by
Apple
AAPL
in its iOS have limited Meta’s ability to track user activity trends.
Apple’s iOS changes have made ad targeting difficult, which in turn has increased the cost of driving outcomes. Measuring these outcomes has also become difficult. Meta expects these factors to hurt advertising growth in the second quarter and throughout 2022.
Meta’s advertisement revenues increased 6.1% year over year to $27 billion and accounted for 96.7% of first-quarter revenues; however, growth is looking tepid in the to-be-reported quarter.
In the second quarter of 2022, Meta expects a 3% headwind in foreign currency exchange rates, which reflects volatility due to the ongoing war.
In the to-be-reported quarter, Meta has lowered its total expenses in the range of $87 billion to $ 92 billion from a prior outlook of $90-$95 billion.
In the second quarter, Meta slowed down its investments in certain Reality Labs projects, which were costing the company a lot of capital as revenues from its primary source have been decreasing.
The company has been diversifying the investments in developing certain AI infrastructure, which will drive revenue growth across ad business and the Metaverse in the long run. This is expected to have aided in reducing operating expenses and might have favored the bottom-line growth in the second quarter.
Meta currently carries Zacks Rank #4 (Sell).
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Key Q2 Developments
During the to-be-reported quarter, Meta announced that the company’s AI researchers and audio specialists from the Reality Labs team built three new AI models — Visual-Acoustic Matching, Visually-Informed Dereverberation and VisualVoice. The AI models currently available for developers will help Meta build the Metaverse as a more refined immersive reality space by making the sound more realistic in mixed and virtual reality experiences.
Meta started testing new ways for Instagram users to verify their age, starting with people in the United States. Apart from uploading their ID (driver’s license or ID card), users can use video selfies and social vouching to verify their age. Instagram requires people to be at least 13 years old to sign up. In some countries, the minimum age requirement is higher. Meta has been facing flak regarding child protection issues on the social networking platform and has taken the initiative to save children and teenagers from unwanted activities.
In order to deal with regulatory headwinds, Meta reached a settlement with the U.S. Department of Housing and Urban Development (“HUD”) that will change the way the company delivers housing ads to U.S. residents. Meta collaborated with the HUD for more than a year to develop a machine learning technology that will implement a new system called the variance reduction method to accurately reflect the targeted audience and rein in privacy breaches.
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