When Fb Stock Will Come Back to 200 Again
Meta Platforms'( FB -0.34% ) stock had one of its all-time runs during the past two years. After falling beneath $150 in March 2020, the stock recovered and broke its all-time high price in May of that year. The rally continued as the stock made multiple new all-time highs in 2021.
Simply since September last year, the stock has declined past 48% from its peak of $384 to simply below $200, as of this writing. What is going on with the plummeting Meta share price?
Epitome source: Getty Images.
The latest earnings outcome isn't great
Last calendar month, Meta reported its fourth-quarter result for the twelvemonth ended Dec. 31, 2021. Revenue grew 20% yr over year to $33.7 billion, just net income fell 8% to $x.3 billion. While the top line exceeded analyst expectations, its bottom line missed the target as price came in college than expected.
On the surface, the result was quite good. Acquirement grew by a respectable twenty%, and that was afterward a 33% growth in 2020! The existent problem was in the weak guidance -- Meta guided for acquirement to grow only 3% to 11% yr over twelvemonth in the beginning quarter of 2022.
In that location are many reasons behind the weak guidance. First, Meta faces a tough comparison against its 48% growth in the commencement quarter of 2021. 2d, it expects farther headwinds on ad targeting in 2022 amid the privacy changes in Apple'due south iOS 14, which allow users to opt-out of information-tracking, and the changes in the regulatory landscape.
On tiptop of that, during the last earnings call, CEO Mark Zuckerberg pointed out that TikTok's curt video format remains a threat to Meta since the TikTok app competes with Meta for user screen fourth dimension. Although Meta retaliates with Reels, its ain brusque video product, there is no guarantee that it can effectively counteract TikTok's rise. Even if Reels proves to be useful in retaining users, it volition be a long time before Meta can monetize it.
Meta'due south metaverse bet remains highly speculative
No discussion of Meta is consummate without covering its shift toward the metaverse. The tech conglomerate aims to become a leader in the metaverse race by investing in technologies, such as virtual reality (Oculus) and augmented reality, and creating a fair and safe ecosystem where stakeholders -- users, developers, and partners -- can flourish over the long term.
While the metaverse manufacture looks promising -- J.P. Morgan thinks information technology is worth $one trillion in yearly acquirement -- there is no guarantee that it is non a fad. Even if the metaverse trend is valid, information technology will accept years, if not decades, for Meta to reach the trillion-dollar mark. Its latest numbers clearly illustrated that. Reality Labs, the visitor's metaverse segment, reported $877 million in revenue in Q4 2021. That was a meager 2.6% of its companywide revenue. Operating loss, however, came in at $three.3 billion, up by more than l% from $ii.one billion concluding yr.
It is too early on to declare that Meta's strategic pivot toward the metaverse industry is wrong. After all, the direction team led by Meta's founder has a solid track record of vision and execution, which led to its current potency in the social media industry. Given enough time, Meta's management team might prove to exist correct again. Nevertheless, investors are probably more in melody with reality now after the earlier excitement.
What's next for the company?
Understandably, investors are disappointed with Meta's latest consequence and outlook guidance.
They shouldn't be overly pessimistic, though. The company is nevertheless the ascendant social media company globally, with ii.8 billion daily active users across its family of apps. For perspective, this business concern made $57 billion in operating income in 2021. Fifty-fifty if growth slows down (which is inevitable, given the visitor's size), it's not the finish of the world.
While investors might categorize Meta's pivot toward the metaverse equally a moonshot bet, at least for now, the social media giant has all the resources -- financial, talent, and technology -- to invest and grow its business. The only caveat is that investors should monitor cash fire to ensure that losses remain at an acceptable level.
Investors will need a lot of patience through the bumpy ride ahead.
Source: https://www.fool.com/investing/2022/03/10/metas-stock-fell-close-to-50-from-its-peak-heres-w/
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