Meta Stock Takes a Dive After Lackluster Q4 and Full Year 2021

Meta Stock Takes a Dive After Lackluster Q4 and Full Year 2021

Meta stock dropped nearly 30% after the company returned lackluster results for Q4 and full year 2021 and an uncertain outlook for Q1 2022.

Meta founder and CEO Mark Zuckerberg must have seen his shadow on Groundhog Day, because he and the Meta team are in for a longer winter than they may have planned. Meta, formerly known as Facebook, reported its fourth-quarter and full-year 2021 financials on February 2, 2022 and their stock dropped nearly 30% from $323.00 per share to $228.07 per share as of 7:59 PM Eastern on February 10.

Source: Google

In the February 2 earnings release, Zuckerberg sounded positive in his opening remarks.

“We had a solid quarter as people turned to our products to stay connected and businesses continued to use our services to grow,” 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.”

Fourth-quarter and full-year 2021 highlights

Meta shared the following highlights for the fourth quarter and full-year 2021:

  • Total revenue for the three months ended December 31, 2021 was $33.7 billion, a 20% increase over the fourth quarter of 2020.
  • Operating margin for the quarter was 37%, down from 46% for the prior year period.
  • Net income of $10.3 billion, an 8% decrease compared to net income of $11.2 billion in the fourth quarter of 2020.
  • Diluted earnings per share were $3.67, a 5% decrease compared to $3.88 diluted earnings per share in the fourth quarter of 2020.
  • The company had capital expenditures of $5.54 billion for the quarter and $19.24 billion for the year.
  • At the end of 2021, Meta and its subsidiaries had 71,970 employees, an increase of 23% year-over-year.
  • For the fourth quarter, ad impressions across their apps increased by 13% and the average price per ad increased 6% year-over-year.
  • For the full year, ad impressions increased by 10% and the average price per ad increased by 24% year-over-year.
  • At the end of the year, Meta had $48.0 billion in cash, cash equivalents and marketable securities.
  • Starting in the fourth quarter of 2021, the company reports financials in two separate segments: Family of Apps (FoA) which includes Facebook, Instagram, Messenger, WhatsApp and “other services, and Reality Labs (RL) which includes augmented and virtual reality related consumer hardware, software and content.
  • Sometime in the first half of 2022, the Meta Class A common stock’s ticker symbol on the NASDAQ will become META.

Facebook’s daily and monthly usage up year-over-year

Compared to the fourth quarter of 2020, Facebook saw an increase in usage:

  • Family daily active people (DAP) averaged 2.82 billion in December 2021, an 8% increase year-over-year.
  • Family monthly active users (MAP) was 3.59 at year end, a 9% increase year-over-year.
  • Facebook daily active users (DAUs) averaged 1.93 billion in December 2021, a 5% increase year-over-year.
  • Facebook monthly active users (MAUs) were 2.91 billion at year end, a 4% increase year-over-year.

First-quarter 2022 guidance

The company shared the following guidance for the first quarter of 2022:

  • Total revenue will be between $27 billion and $29 billion, representing 3% to 11% growth year-over-growth.
  • The company said that, in terms of pricing, growth will be negatively impacted by lower advertiser budgets because of inflation and supply chain disruptions, as well as some impacts from Apple’s iOS changes.
  • Total expenses are estimated to be between $90 billion and $95 billion, down slightly from previous guidance of $91 billion to $97 billion.

Insider Take

What does the stock drop mean for Meta? It means that not even Meta is immune to stock market risk, social media competition, and larger economic forces. The company took its own risk by rebranding as Meta, and by envisioning a metaverse where Facebook and the company’s family of apps are only just a part. It is great they want to differentiate themselves, but they are already in regulatory hot water for using their dominant market power to acquire competitors (e.g., Instagram and WhatsApp). Do they really want to draw attention to themselves by becoming king of the metaverse? Also, the competition against video-first platforms like TikTok is really heating up, and Meta is betting on something that doesn’t quite exist yet, except perhaps in Zuckerberg’s mind. What 2022 holds for Meta is anyone’s guess, but they are certainly not off to a good start.

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