Meta Platforms (META.US), formerly known as Facebook, will report earnings for calendar Q3 2022 today after the close of the Wall Street session. Company will be the third US mega-tech company to report earnings this week, following Microsoft and Alphabet, and reports from previous paint a rather bleak picture of the tech sector. Report from Alphabet should be seen as a hint as both companies are reliant on ad revenue.
What does the market expect?
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Create account Try a demo Download mobile app Download mobile appWhen it comes to headline results, the market expects Meta to report EPS of $2.27, what would be a result almost 30% YoY lower. Revenue is seen coming in at $27.4 billion, or 5.5% YoY lower than a year ago. Net income is expected to drop 42% YoY, to $5.26 billion. A deterioration in fundamentals is coming from an increased competition from TikTok and YouTube. Meta Platforms tries to compete with those by focusing more on Reels, short-video format, but whether it succeeds remains to be seen. Increased focus on Reels would mean increasing spending on contents' creators and this means sharing revenue, what may jeopardize any increase in sales.
Meta criticizes Apple's AppStore policy change
Meta Platforms criticizes a newly announced policy change in Apple's AppStore. The change will see Apple charging a 30% fee on the 'boosted' posts in apps like Instagram or TikTok. Meta says that Apple is attempting to undercut others in the digital economy and that the move contradicts its previous claims that it will not take share of developer advertisement revenue. In short, the change means that part of revenue that goes to Meta will now go to Apple instead.
Results from Alphabet and Snap point to slowing ad spending
The most important hint ahead of earnings release from Meta Platforms are results from other ad revenue-reliant companies, like Alphabet and Snap. Both of those noted that companies are slowing spending on ad revenue amid spiraling inflation and uncertain macroeconomic outlook. Alphabet even said that it will slow hiring and focus more on cost control in order to cope with expected drop in ad revenue. It is highly unlikely that a trend of slowing ad spending will somehow not relate to Meta. Traders should look at any hints on how big of an impact it may have on the Meta's business
Meta Platforms (META.US) has a very tough year. Stock is down almost 60% year-to-date and finished yesterday's trading just slightly above 2020 pandemic lows in the $137.10 area. Challenges have been mounting for the company throughout the year and slowdown in ad spending, signaled by Alphabet and Snap, may put further strain on the company's business. Also changes in AppStore policies may turn out to be another hit for the company. Source: xStation5
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