Meta’s Q4 Earnings & Q1 Revenue Guidance Disappoint; Shares Plunge 23%

Shares of Meta Platforms, Inc. (NASDAQ: FB) plunged almost 23% in the extended trading session on Wednesday after the social networking service company posted disappointing fourth-quarter 2021 earnings. The company also provided Q1 2022 revenue guidance below expectations. 

Management has cautioned about several factors in the upcoming period. These include ad targeting and measurement headwinds from Apple’s iOS changes (expected to have an impact of $10 billion on business in 2022), regulatory changes, increased competition, macroeconomic challenges such as cost inflation and supply chain disruptions, and foreign currency impact. 

Results in Detail 

Meta reported earnings of $3.67 per share, down 5% on a year-over-year basis, and missed Street estimates of $3.84 per share, as Facebook user growth was impacted by a few headwinds in the quarter. Net income came in at $10.3 billion, down 8%. 

On the positive side, the company reported strong Q4 revenues of $33.67 billion, topping consensus estimates of $33.38 billion, and grew 20% year-over-year. Outstanding advertising revenue growth (up 20%), aided by a 6% rise in the average price per ad and a 13% increase in the number of ad impressions delivered across the Family of Apps, acted as tailwinds. 

Facebook’s average daily active users (DAUs) for December 2021 increased 5% year-over-year to come in at 1.93 billion, while monthly active users (MAUs) were 2.91 billion as of December 2021, up 4%. 

Meanwhile, the operating margin contracted to 37% from 46% in the same quarter last year. 

Segmental Revenues 

Family of Apps (FoA), which includes Facebook, Instagram, Messenger, WhatsApp, and other services reported revenues of $32.8 billion, up 19.7% year-over-year. 

Revenues at Reality Labs (RL), which includes augmented and virtual reality related consumer hardware, software, and content, came in at $877 million, up 22.3%. 

Capital Deployment 

In 2021, Meta repurchased Class A common stock worth $44.81 billion, including buybacks of $19.18 billion in the fourth quarter. As of December 31, 2021, the company had remaining share repurchase authorization worth $38.79 billion. 

Full-Year 2021 Results 

For 2021, Meta reported earnings of $13.77 per share, up 36% year-over-year. Net income stood at $39.4 billion, up 35%. Also, revenues grew 37% to $117.9 billion. 

Outlook 

Looking forward, the CEO of Meta, Mark Zuckerberg, said, “I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce, and virtual reality, and we’ll continue investing in these and other key priorities in 2022 as we work towards building the metaverse.” 

“People have a lot of choices with how they want to spend their time, and apps like TikTok are growing very quickly. This is why our focus on Reels is so important over the long term,” Zuckerberg added. 

Meta’s CFO Dave Wehner commented, “We expect first quarter 2022 total revenue to be in the range of $27-29 billion, which represents 3-11% year-over-year growth. We expect our year-over-year growth in the first quarter to be impacted by headwinds to both impression and price growth.” 

The consensus estimate for Q1 2022 revenue stands at $30.1 billion. 

Wehner added, “We expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories.” 

Meta expects total expenses to be in the $90-$95 billion range in 2022, compared to prior forecasts of $91-$97 billion, driven by technical and product talent investments, along with infrastructure-related expenses. 

Capex is estimated between $29-$34 billion, driven by investments in data centers, servers, network infrastructure, and office facilities. 

Website Traffic 

The earnings results were observable on TipRanks’ new tool that measures visits to Meta’s websites. Pre-earnings, we were able to see insights into Meta’s performance in the December quarter. 

According to the tool, one of Meta’s domains, facebook.com, recorded a 9.26% year-over-year decrease in global visits in December compared to the same period last year. Also, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at a decline of 4.62%. 

Additionally, a website traffic downtrend was visible. In the last two months of Q4 2021, total estimated visits on facebook.com showed a declining trend, on a global basis. This, in turn, indicated that the company might have had to bear the brunt on profitability in the reported quarter.

Overall, the Q4 traffic data hinted that Meta would show poor earnings results.

Wall Street’s Take 

Consensus among analysts is a Strong Buy based on 14 Buys versus 1 Hold. That includes one Buy rating given today, post-earnings, by JMP Securities.

The average Meta Platforms price target stands at $402.86 and implies upside potential of 24.7% to current levels. Shares have gained more than 20% over the past year. 

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