Share price of Facebook parent company Meta Platforms rises as revenue grows, more users added in Q1

Bloomberg: Shares of Facebook parent company Meta Platforms Inc. jumped during premarket hours on Thursday, a day after reporting that its main platform added more users than expected in the first quarter, which could allay concerns that the company is losing momentum as a new generation. flock to younger sites like TikTok.

The stock gained as much as 19% in premarket trading in New York, consistent with advances after Wednesday’s close.

Meta announced 1.96 billion daily users for its flagship platform yesterday, a return to growth after the first-ever decline in the December quarter. Analysts had estimated it at 1.94 billion.

Revenue for the period jumped 6.6% to $27.9 billion, and would have been higher without the war in Ukraine, the company said. The stock had fallen nearly 50% this year as investors grew increasingly concerned that Meta’s main driver of business and profit – advertising in its social media feeds – was losing steam. .

Those worries appear to have been allayed — at least for now — given that Facebook added 31 million new daily active users in the last quarter. Yet many of Meta’s challenges remain. CEO Mark Zuckerberg has acknowledged that video-sharing app TikTok, owned by Chinese company ByteDance Ltd., offers serious competition for younger users.

At the same time, changes to data collection policies on Apple Inc.’s iPhones hampered Meta’s ability to serve targeted ads to users. Last quarter, Meta executives said the privacy changes would cut the company’s 2022 sales by $10 billion. Advertisers also spent less due to problems with supply chains, inflation and the ongoing war in Ukraine, Meta executives said.

A prolonged downturn would make it harder for the company to justify Zuckerberg’s expensive, VR-fueled vision of the metaverse, a business that won’t return a profit for years, if ever.

On a call with analysts Wednesday, Zuckerberg reiterated that it will be years before Meta’s Reality Labs unit, which develops AR and VR technology, contributes significantly to his business. Meanwhile, the company said it is spending billions and hiring thousands of workers to develop the platform, which Zuckerberg sees as the next major computing shift, into a fully immersive digital environment where users will interact virtually while they work, buy and play games.

Shares of Menlo Park, Calif.-based Meta soared as high as $210.14 in extended trading after the report. They had slid 3.3% to $174.95 at Wednesday’s close in New York.

Net income in the first quarter was $7.47 billion, or $2.72 per share. Analysts had estimated earnings of $2.56 per share. Sales in the current period will be $28 billion to $30 billion, Meta said in a statement Wednesday, down from the $30.7 billion analysts had predicted on average. Again, the company pointed to the ongoing war in Ukraine as a factor.

“This outlook reflects the continuation of trends impacting revenue growth in the first quarter, including weakness in the second half of the first quarter that coincided with the war in Ukraine,” the company said in the statement.

Meta said that in light of the revenue outlook, it is cutting overall spending plans for the year by $87 billion to $92 billion from a previous target of $95 billion.

On the call with analysts, Zuckerberg said Meta plans to launch its new virtual reality headset, named Project Cambria, later this year. The headset is intended for business use as a laptop replacement, he added.

The company shocked investors in February when it said daily users of its main service Facebook fell slightly in the fourth quarter for the first time ever, suggesting the main social network had peaked in popularity. The stock fell 26% the next day, underscoring concerns that people — especially teenagers and young adults — were defecting to new platforms like TikTok, and that advertisers would follow.

In October, Zuckerberg said Facebook would focus on attracting “young people” to the service to combat the rise of TikTok and other competing products. That meant prioritizing Reels, a copycat video format from TikTok on Instagram and Facebook owned by Meta. While the use of Reels is growing rapidly, the company’s advertisers have not been so quick to switch to the new format.

COO Sheryl Sandberg said on the call on Wednesday that making big bucks from Reels would be “a multi-year journey” similar to the company’s efforts to make money from disappearing. of stories.

Reels already account for more than 20% of the time people spend on Instagram, Zuckerberg said. The company does not provide metrics for total time spent on Instagram or its other apps, including WhatsApp and Messenger.

About Raymond A. Bentley

Check Also

Astronics (ATRO) stock price: Why it rose 7.25%

The stock price of c Corporation (NASDAQ: ATRO) rose 7.25% in the previous trading session. …