If you own stocks, bad news, you probably just lost money.
Social media giant Meta, better known as Facebook, is discounting more than 20% on after-hours trading. And Spotify, music streaming entrepreneur and podcasting average weight, is more than 15% off after today’s trading session. Both sharp declines come on the heels of underwhelming results from PayPal, which also saw its shares fall, and very good results from Alphabet.
Alphabet’s strong fourth-quarter performance is starting to look more like an outlier than an average.
Let’s talk about Meta, and then Shopify, and analyze exactly what’s going on.
Expensive Quarter and Goal Off Guidance
In the fourth quarter, Facebook generated revenues of $33.67 billion, leading to operating income of $12.59 billion and net income of $10.29 billion. The company also reported earnings per share of $3.67.
How do these numbers compare to analysts’ expectations? Per Yahoo Finance Averages, analysts had expected the company to post $33.41 billion in revenue and earnings per share of $3.84 billion. Thus, Facebook has achieved solid revenue, even if it has lost earnings per share.
The profit loss wasn’t just a few cents a share, however; It’s a bigger problem for the company. To be clear, let’s do some year-to-year comparisons. In the fourth quarter of 2020, Meta had operating income of $12.76 billion, or about 46% of its revenues over the same period. The last number dropped to just 37% in its most recent quarter. That’s a dramatic decline in operating profitability for the stomach.
Among the rising costs that reduce Meta’s profitability are its investments in VR or the so-called metaverses.
Reality Labs, which Facebook says includes its “hardware, software and consumer content related to augmented and virtual reality”, generated $877 million in revenue during the most recent quarter, up from $717 million in the fourth quarter period. 2020. However! Reality Labs’ operating loss was $3.3 billion in the fourth quarter of 2021, up from $2.1 billion in the fourth quarter of 2020.
In short, the metaverse momentum in Meta so far is not the gold mine its core business has proven over the years. And this lack of easy profit is hurting the company’s overall results. The Metaverse is far from the gold-to-back shit the company clearly hopes it will become in time.
Things get worse for Meta if we look ahead. The company’s CFO said he expects “total revenue for Q1 2022 to be in the $27-29 billion range,” representing growth of 3% to 11%. What is not good. Analysts had expected Meta to generate $30.14 billion in the first quarter of 2022, so the company’s guidance is miserable.
Stock has dropped.
The Joe Rogan situation aside, Spotify is still having a pretty rough week. After dropping 5.75% during regular trading, the company lost a double-digit percentage of its value in after-hours trading.
Why? The company really managed to better earnings expectations, losing about 50% less per share than the market expected. And its revenues of €2.69 billion were a few beeps ahead of expectations for the fourth quarter of 2021.
And it’s still being crushed. Why? As with Meta, it’s the future that’s the problem.
Spotify expects to grow from 406 million monthly active users at the end of 2021 to 418 million in the first quarter of 2022. And it expects to grow its paid user base from 180 million to 183 million during the same three-month period.
How out are these figures? looking for alpha says investors expected 185.3 million paid users in the first quarter of 2022 and 422 million monthly actives. So Spotify managed to do well in its last quarter, but investors are far from excited about its next performance.
We’ve been seeing more tech companies clash with the investing public in recent weeks than I can remember in a while. More meta-analyses are needed, but it appears that the shift in the wind for tech companies isn’t something that’s just happening to SaaS companies or recent IPOs. A lot of people are getting stuck.