Shares in Meta Platforms (nee Facebook) slumped 18% after hours Wednesday after the company not only revealed falling revenues but a 52% slump in net profit for the September quarter – worse than even the most pessimistic forecasts had predicted, bringing a lot of angst and concern about the company to the surface.
Now all that can save the tech sector from a continuing slide is outperformances by Amazon and Apple when they report their September quarter figures Friday morning, Australian time.
Meta shares had slid more than 5% in regular trading in the wake of the weak report from Alphabet (Google and YouTube especially). Alphabet shares slid more than 8% in regular trading and Amazon shares fell 4%. Apple shares lost nearly 2% and those falls and others across the tech group saw the Nasdaq shed 2%.
It was only a week ago that Snap’s weak results left Wall Street stirred, not shaken, then Tuesday Alphabet’s poor quarterly figures – especially for ad revenues and Google and YouTube, Meta Platforms expected weak figures will see Wall Street shaking when trading resumes Thursday.
Snap shares lost 30% of their value in one go but that didn’t impact the wider market which bounced higher; Alphabet shares slid 9% on Wednesday and helped the market lower, especially Nasdaq which shed 2%.
A 7% drop by shares in Microsoft, which also revealed indifferent figures on Tuesday didn’t help confidence either.
The 18+% slide is on top of the massive loss in value so far in 2022 up to yesterday of more than 60%. At around $US105-$US106 each, Meta shares are at their lowest since mid 2016.
Meta reported a second straight quarterly revenue decline and is forecasting another drop in the fourth quarter.
Revenue in the Reality Labs unit, which houses the company’s virtual reality headsets and its futuristic Metaverse business, fell by almost half from a year earlier to $US285 million.
Its loss widened to $US3.67 billion from $US2.63 in the same quarter last year and the company’s Reality Labs division, which houses its VR headsets (which are a key part of its Metaverse ambitions), lost over $US9 billion in the first three quarters.
The company said revenue for the last three months of the year will be $US30 billion to $US32.5 billion. Analysts were expecting sales of $US32.2 billion. The company’s estimate is well short of the $US33.67 billion in revenue for the 4th quarter of 2021, another big negative for investors.
While revenue fell 4% in the third quarter to $US27.71 billion (from $US29 billion a year earlier), Meta’s costs and expenses rose 19% year over year to $US22.1 billion. Operating income declined 46% from the previous year to $US5.66 billion.
Apple’s new privacy protocols added to its iOS system for iPhones in 2021 have hurt Facebook and Instagram, as has competition from TikTok (which is under investigation in the US, Europe and Australia for its close links to China’s Communist Party government and security services).
Snap, Pinterest and other mobile platforms are also feeling the pain – Twitter included.
Meta said that it had 197 million daily active users in the US and Canada in the period, up from 196 million during the same quarter in 2020. Meta derives the bulk of its revenue from users in North America.
In addition to the quarterlies from Amazon and Apple, US markets are awaiting the conclusive statement from Elon Musk that he is going to complete his bid for Twitter at $US54.20 a share. Musk has been letting everyone know that he will finish the deal and reportedly showed up at Twitter’s HQ with a kitchen sink this week. His deadline is 5pm New York time Friday or 8am Saturday.
