After Meta Platforms (NASDAQ:META) held its third-quarter earnings conference call, the stock had fallen after hours as low as $103.08 - a new low of sorts in its recent struggles, a near-21% tumble to its lowest point since February 2016.
That followed a report where revenues did better than expected - admittedly, against a heavily lowered bar - but profits missed consensus, and those have fallen for four quarters in a row. Revenue did grow slightly in constant currency, but "We're still behind where I think we should be," CEO Mark Zuckerberg said on the call. "But we believe that we will return to healthier revenue growth trends next year ... It's not clear that the economy has stabilized yet so we're planning our budget somewhat more conservatively." He also tamped down worries about app growth. "Our product trends look better from what I see than the commentary I've seen suggests," Zuckerberg said on the call. "There's been a bunch of speculation about engagement on our apps and what we're seeing is more positive."
Meanwhile, in the face of a call from investor Brad Gerstner to cut metaverse investments (through Meta's Reality Labs unit) to "no more than $5B per year," Meta execs were signaling that was not in the cards. Chief Financial Officer Dave Wehner elaborated that "We do anticipate the Reality Labs operating losses in 2023 will grow significantly year over year." And Zuckerberg amplified that point: "The internal indications I've seen suggests we're doing leading work, and are on the right track with these investments, so I think that we should keep investing heavily in these areas." "There's still a long road ahead to build the next computing platform, but we're clearly doing leading work here. This is a massive undertaking and and it's going to take a few versions of each product before they become mainstream. But I think that our work here is going to be of historic importance and create the foundation for an entirely new way that we will interact with each other and blend technology into our lives, as well as the foundation for the long term of our business," Zuckerberg said.
As we discussed, the reason the earning was a huge miss is Meta's expenses are growing too fast. And I already mentioned yesterday that "investors need four key levers to drive the stock higher. One, revenue growth above 2% and guidance of a possible acceleration in the fourth quarter. Two, flat or even declining year over year expense growth. Three, increased focus on the core business away from the Metaverse. And four, a reacceleration of share repurchases. Indeed, a tall order for Meta on its earnings report." And Unfortunately, META miss literally all of that!
At the after-hour price of $103 per share, Meta is trading for just 11.5x this year's expected net profit. When we account for Meta's net cash position, the valuation is even lower. With META down more than 70% from its highs, the market is clearly accounting for major issues when pricing Meta's shares. And that makes sense, at least to some degree - the success of the Metaverse strategy is, so far, not proven, and the expense growth rate is a major issue that needs to be addressed.That being said, if Meta manages to reverse course when it comes to overspending on employees, and when/if the Metaverse strategy pays off, Meta could be a highly rewarding investment. If revenue growth resumes, as CEO Mark Zuckerberg believes will be the case soon, and if stronger expense controls result in margin expansion, Meta could generate considerable profit growth going forward.
From Tech side, 124ish is a HUGE weekly basis support level, break this with Vol is extremely dangerous for long side of META holders. But I don't think META will test the second weekly basis support, but will definitely test 100ish daily support. IF see some tech buyers bought in at this level, might be a very good price correction trade.
Good luck!
The investments and idea published may not be suitable for all investors. If you have any doubts as to the merits of an investment, you should seek advice from independent financial advisor or other professionals to determine what may be best for your individual needs. We do not and cannot guarantee that your use of our APP and/or any of its features will generate profits. All opinions, news, reviews, research, analysis, prices, or other information contained on or provided via this site are provided on an “as is” basis as general market commentary and/or expressions of opinion only. Information may not be complete, accurate or up to date and may not be suitable for every individual, nor be a suitable basis for an investment decision. No representation, warranty, undertaking, assurance or guarantee (express or implied) is made or given as to the availability, adequacy, accuracy, completeness, reasonableness or appropriateness of any of the information or opinions provided or expressed on or through this site. There is no obligation to notify you of any corrections or modifications.
That followed a report where revenues did better than expected - admittedly, against a heavily lowered bar - but profits missed consensus, and those have fallen for four quarters in a row. Revenue did grow slightly in constant currency, but "We're still behind where I think we should be," CEO Mark Zuckerberg said on the call. "But we believe that we will return to healthier revenue growth trends next year ... It's not clear that the economy has stabilized yet so we're planning our budget somewhat more conservatively." He also tamped down worries about app growth. "Our product trends look better from what I see than the commentary I've seen suggests," Zuckerberg said on the call. "There's been a bunch of speculation about engagement on our apps and what we're seeing is more positive."
Meanwhile, in the face of a call from investor Brad Gerstner to cut metaverse investments (through Meta's Reality Labs unit) to "no more than $5B per year," Meta execs were signaling that was not in the cards. Chief Financial Officer Dave Wehner elaborated that "We do anticipate the Reality Labs operating losses in 2023 will grow significantly year over year." And Zuckerberg amplified that point: "The internal indications I've seen suggests we're doing leading work, and are on the right track with these investments, so I think that we should keep investing heavily in these areas." "There's still a long road ahead to build the next computing platform, but we're clearly doing leading work here. This is a massive undertaking and and it's going to take a few versions of each product before they become mainstream. But I think that our work here is going to be of historic importance and create the foundation for an entirely new way that we will interact with each other and blend technology into our lives, as well as the foundation for the long term of our business," Zuckerberg said.
As we discussed, the reason the earning was a huge miss is Meta's expenses are growing too fast. And I already mentioned yesterday that "investors need four key levers to drive the stock higher. One, revenue growth above 2% and guidance of a possible acceleration in the fourth quarter. Two, flat or even declining year over year expense growth. Three, increased focus on the core business away from the Metaverse. And four, a reacceleration of share repurchases. Indeed, a tall order for Meta on its earnings report." And Unfortunately, META miss literally all of that!
At the after-hour price of $103 per share, Meta is trading for just 11.5x this year's expected net profit. When we account for Meta's net cash position, the valuation is even lower. With META down more than 70% from its highs, the market is clearly accounting for major issues when pricing Meta's shares. And that makes sense, at least to some degree - the success of the Metaverse strategy is, so far, not proven, and the expense growth rate is a major issue that needs to be addressed.That being said, if Meta manages to reverse course when it comes to overspending on employees, and when/if the Metaverse strategy pays off, Meta could be a highly rewarding investment. If revenue growth resumes, as CEO Mark Zuckerberg believes will be the case soon, and if stronger expense controls result in margin expansion, Meta could generate considerable profit growth going forward.
From Tech side, 124ish is a HUGE weekly basis support level, break this with Vol is extremely dangerous for long side of META holders. But I don't think META will test the second weekly basis support, but will definitely test 100ish daily support. IF see some tech buyers bought in at this level, might be a very good price correction trade.
Good luck!
The investments and idea published may not be suitable for all investors. If you have any doubts as to the merits of an investment, you should seek advice from independent financial advisor or other professionals to determine what may be best for your individual needs. We do not and cannot guarantee that your use of our APP and/or any of its features will generate profits. All opinions, news, reviews, research, analysis, prices, or other information contained on or provided via this site are provided on an “as is” basis as general market commentary and/or expressions of opinion only. Information may not be complete, accurate or up to date and may not be suitable for every individual, nor be a suitable basis for an investment decision. No representation, warranty, undertaking, assurance or guarantee (express or implied) is made or given as to the availability, adequacy, accuracy, completeness, reasonableness or appropriateness of any of the information or opinions provided or expressed on or through this site. There is no obligation to notify you of any corrections or modifications.