Meta-Facebook shares plummet by 24 per cent

Vladislav Petlenko, Chief Investment Officer of our partner company Sigma Global Management shares his view on the underlying reasons for the collapse with investment portal Fintalk:

Meta-Facebook shares plummet by 24 per cent

'Shares of Meta-Facebook platforms plummeted by 24%, pulling other social network stocks down with them, as investors grew disappointed by Meta's quarterly report.

A 24% drop in shares is a significant loss for the company and investors. This is almost 200 billion dollars from capitalization.

However, if we compare investor expectations and real numbers for the fourth quarter of 2021, we can say that Facebook managed to generate solid revenue, even if the company missed little earnings per share. The company’s revenue increased by 20% year-on-year to $33.67 billion. EPS came in at $3.67, while analysts had expected $3.85.

Meta had previously warned that its advertising business would face "significant uncertainty" in the fourth quarter. The company attributed the loss of profits in part to a change in privacy settings in Apple's software that now prevents applications from tracking their users’ online activity. This makes it harder for Meta platform advertisers who rely on data to develop new products and explore the market.

Along with the outflow of advertising, Meta-Facebook is losing billions mainly on Reality Labs, a division associated with funding the company's new direction Quest VR (virtual reality, metaverse). The company division develops VR software, future AR glasses, and is involved in projects related to the company's new direction. This division lost $10.2 billion last year and reported $2.3 billion in revenue. Statistics include Quest sales and share of VR app purchases. These statistics include Quest sales and share of VR application purchases.

Spotify also fell victim to the unjustified expectations of investors. Indeed, the company managed to live up to earnings expectations, losing about 50% less per share than the market expected. And its revenue of 2.69 billion euros beats expectations by several percent in the fourth quarter of 2021.

Spotify expects the company to grow to 418 million active users in the first quarter of 2022, as well as grow its paid user base from 180 million to 183 million. However, investors were expecting 185.3 million paid users in the first quarter of 2022 and 422 million monthly active users. Thus, Spotify managed to do well in the last quarter, but investors are not thrilled about its upcoming results."

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