Facebook Parent Share ID pads (FB) rose Thursday, although the social media giant reported first-quarter earnings that fell short of revenue and expectations. FB stock doubled as Wall Street was encouraged by what the company said.
Meta, formerly Facebook, announced its quarterly results late Wednesday. Revenue was $27.9 billion, below estimates of $28.3 billion. Meta also expects second-quarter revenue to be in the $28 billion to $30 billion range. The midpoint of $29 billion is below analysts’ estimates of $30 billion.
Adjusted income of $2.72 per share beat expectations of $2.56.
FB stock jumped 15.8% to 202.65 during afternoon trading on stock market today.
Jefferies analyst Brent Thill maintained a buy rating on FB stock and a price target of 330.
He said Facebook would have beat its revenue estimates had it not been for macroeconomic conditions and the conflict between Russia and Ukraine. User growth would have been higher had it not been for the decrease in the number of Russian users.
Another surprise in the earnings report was that total expenses for the year decreased $3 billion, to a range of $87 billion to $92 billion.
FB stock: focus on increasing profitability
“We are particularly encouraged to hear that management is focusing on ‘increasing overall profitability’ as Reality Labs continues to fund growth,” Thill wrote in a note to clients.
However, he said, “there are many uncertainties that may affect 2022 revenue growth.”
Baird analyst Colin Sebastian lowered his target price for FB stock to 275 from 325 but maintained an outperform rating.
Meta, in its conference call with analysts, noted the continuing negative impact of Apple’s privacy changes, weaker e-commerce growth, declining spending after the Russian invasion of Ukraine, and negative macroeconomic trends.
What encouraged analysts, however, is that Meta topped estimates of user growth.
A short video of moving the needle
Also, Sebastian said Meta’s short video platform, called Reels, “is starting to move the needle, helping combat competitive headwinds from TikTok. Overall, video accounts account for about 50% of the time spent on Facebook.”
“Monetization of the reels could be a catalyst for stocks if they go up purposefully later this year,” Sebastian said.
“Facebook’s tone on the call suggests that ‘the worst’ may be behind the dead, with progress being made in mitigating both revenue and competitive headwinds,” he said.
Shibli El-Serafi, FBN Securities analyst, maintained an outperform rating on Facebook’s stock and lowered its target price to 270, from 300.
In the quarterly report, Meta said revenue was up 7% from the same period last year. The number of daily active users rose 4% to 1.96 billion, according to estimates. Monthly active users rose 3% to 2.94 billion.
Switch from social network to Metaverse
Meta is undergoing a major and costly transformation from social networks to the metaverse. Face many other challenges.
For example, it is still seeing a drop in revenue due to Apple changing the iPhone operating system to reduce ad tracking. It also faces increased competition from TikTok and remains under pressure due to antitrust allegations from Congress.
At the same time, digital ad spending decisions remain in flux as many small and medium-sized businesses consider creating new channels away from Meta for the first time.
In mid-April, two analysts target price cut on FB stock, raising concerns about the conflict between Russia and Ukraine and its impact on European economies, as well as shifts in digital advertising.
FB stock is down about 40% this year.
FB Stock: Confident of Long-Term Opportunities
CEO Mark Zuckerberg said, in written notes with Meta earnings release.
“More people are using our services today than ever before, and I am proud of how our products serve people around the world,” he said.
Meta forecasts 2022 expenses in the range of $87 billion to $92 billion. That’s down from its previous forecast of $90 billion to $95 billion.
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