Investors seem nervous about
Meta Platforms
‘ earnings later Wednesday after a gloomy set of results from social media peer
Snap.
Those without short memories will understand why.
Shares in Meta (ticker: META) slipped 1.3% in premarket trading on Wednesday, with the social media giant that operates Facebook, Instagram, and WhatsApp due to report earnings after the closing bell. To blame for the slide were results from Snapchat owner
Snap
(SNAP) Tuesday revealing earnings short of analysts’ estimates and a gloomy outlook for revenue in the current quarter.
Snap lost 18 cents a share in the fourth quarter, much worse than loss of 11 cents eyed by analysts, and the group said it sees revenue falling between 2% and 10% on an annual basis in the current quarter.
While all social media companies are different, it’s likely that some of the headwinds around advertising and user engagement have a read-across for Meta. At the very least, it’s an eerie reminder of a period that Meta investors will surely remember.
Feb. 3, 2022, marked what was the biggest one-day loss in market capitalization for a stock in the history of U.S. companies, when Meta shares lost more than a quarter of their value, wiping away more than $232 billion of market cap. The stock hasn’t recovered to levels seen before the earnings release that prompted the plunge.
In truth, many of the same headwinds that met Meta stock last year remain risks: A tough advertising environment—especially in the wake of a major ad industry shakeup by
Apple
(AAPL)—fading engagement, and fierce competition from TikTok.
A poor read-across from Snap will have Meta investors on edge, because it’s clear that those headwinds remain salient. Add in a macroeconomic environment that is weighing on advertisers and cost horror at Meta, which has spent bundles in its bet on the future of the metaverse, and you have more than a few reasons to be nervous ahead of earnings.
Write to Jack Denton at jack.denton@barrons.com
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