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Meta Platforms muddles along

26 Jul 2022 09:15 AM

Meta Platforms muddles along

The past 11-months have not been kind to the Meta share price as the stock tumbled by almost 60%. The stock traded above $382 in August 2021, printing a record high, but it has been in reverse since. Back then, the company was going by its previous name of Facebook, and even though it put the “F” in “FANGs”, the stock peaked four months ahead of the NASDAQ 100, which recorded its last record high in December. The divergence between the two in the last few months of 2021 as a warning sign that traders had fallen out of love with the social media company.

Meta’s share price slumped in early February when it posted very disappointing fourth quarter numbers. The stock lost more than 20% of its value in one session. A drop of that scale is typically associated with a medium sized company, not one of the big beasts of the tech industry. EPS was $3.67, missing the $3.84 forecast. Daily active users (DAUs) dipped to 1.93 million, fractionally below expectations and it was the first fall in DAUs on record. The social media titan expanded at an incredible pace, and that fuelled the rally in the share price, but the fact that active users fell, was a major warning the group could be at saturation point. In addition to that, the guidance for first quarter revenue was $27-$29 billion, while analysts were predicting just over $30 billion, so that was another factor in the poor update. Advertising revenue is the lifeblood of Meta Platforms, and worries about inflation, supply chain issues as well as Covid-restrictions in China are hanging over companies that advertise on Facebook, and that has contributed to the underwhelming guidance.

In April, the stock enjoyed a rally as the firm delivered well-received first quarter numbers. It is worth noting that expectations had been well manged ahead of the release. EPS was $2.72, beating the $2.56 consensus estimate, while revenue was $27.91 billion, missing forecasts, and it was at the lower end of their own guidance issued in February. On an annual basis, sales increased by 7%, making it the first single digit percentage growth rate on record. Once again, adding weight to the idea the company is close to topping out in terms of expansion. In recent months, the economic climate has deteriorated and therefore firms might curtail their advertising spending.

Meta’s share price has been trending lower recently, and while it holds below the $184 mark, the wider bearish trend could continue, support might be found at $154.22 or $150.00. If the stock rebounds, it might target $200.

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