fbpx

Meta Flops

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

  • The stock is up nearly triple digits in 2023

  • On an annualized basis, revenue and monthly active users (Mau) are expected to go down

  • Company continues to ramp up losses in its AI division

  • Is the stock up for a major correction?

Wallstreet darlings Meta reported earnings last week; shares are up 14% since the announcement, cheered on the back of consensus beats in both top and bottom line, along with an overly optimistic picture about its near future combined with lower headcount – labeled as the year of the “efficiency” in combination with more AI hype that is aimed at elevating the company towards its bright future.

However, its recent performance pales in comparison to the stocks’ jaw-dropping 98.8% return since the start of the year, outrunning by miles, in the same manner that Usain Bolt did to his competitors, indices such as the NASDAQ 100 and S&P 500, which recorded only 19.87% and 7.29% returns for the same period, respectively.

Chart, line chart

Description automatically generated

Many market commentators outweighed the positive portion of META’s quarterly results at the expense of the negative side, preventing existing and potential investors from forming a well-rounded, educated decision about the company’s future. Namely that:

· Declining revenues which are a product of falling revenue per user along with MaU quite likely reaching a ceiling and a potential decline from here on

· Company’s Flop on AI, which not only bleeds billion, but even FB’s programmers have no interest in

Let’s zoom out the bigger picture for Meta; if we annualize its latest quarterly result, the company will continue with its declining revenues and reach $114.58 bn of sales in 2023, down from an all-time high peak of $117.9 bn in 2021, on the back of pulled-forward turnover as most of its users consumed unimaginable quantities of online content, during the covid-19 pandemic. That caused the average revenue per user (ARPU) to skyrocket. However, that period proved to be short-lived. The company’s earnings have entered the “decline phase” after years of expansion.

Chart

Description automatically generated

The covid period distorted the picture for META, which thought that the past growth would translate into the future. There was a big spike during the pandemic, but things started to normalize in the post-lockdown period.

In the post-pandemic period, people are no longer locked in. They chose to experience life, unsurprisingly. As a result, user growth has reached a wall. Monthly active users are incrementally growing, unable to break the magical barrier of 3 billion or a whopping 38% of the world population!

Zuckerberg’s company reached a staggering +32% YoY growth rate in its ARPU, a considerable spike thanks to the Covid-19 pandemic, which turned out to be unsustainable.

Similarly, to the revenue timeline, the company ARPU is contracting after growing every year since its IPO in 2008, as it was down 3% in 2022 and is expected to mirror that performance in 2023, as people spend less time on the social media platform.

Chart, bar chart, histogram

Description automatically generated

The AI flop, also known as “Reality Labs” or how the “Metaverse,” is not playing out as expected and is bleeding investors’ money. According to some reports, Meta has invested over $100 bn on metaverse research and development to date, $15 bn in the past year alone – with apparently little to show for it. Zuckerberg’s newfound metaverse obsession could be seen as a preemptive virtual land grabs for what is generally agreed to be the future of the internet.

The irony here is so great that not even META’s employees are using it – an internal company memo reported by Time.com said: “The simple truth is, if we don’t love it, how can we expect our users to love it?”

Chart, waterfall chart

Description automatically generated

If the metaverse does not work, “cutting corners,” also known as “efficiencies,” will.

Pre-pandemic, especially the pandemic period, brought unusually high demand for META’s products, but that growth rate was not sustainable in the post-pandemic world.

The company has drastically lowered its headcount to please shareholders and reduced its swollen operating expenses, mainly from a spike in its headcount, to protect its dropping profitability margins from further contractions.

Chart, line chart

Description automatically generated

Despite all the bearish comments, the company does not look expensive on a relative basis, which trades at nearly 20x the next twelve months’ earnings.

Chart, bar chart, funnel chart

Description automatically generated

However, to justify that growth premium, the company needs to deliver and possibly scrap its AI division altogether. The recently falling P/E multiple reflects that investors are somewhat skeptical about the company’s future growth prospects, and as the growth narrative turns south, the next in line to fall might be its price.

Remember, price is what you pay, but value is what you get, and the market is only sometimes very efficient at equating the two variables.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Leverage Shares ETPs

Elaborado por

Boyan Girginov

Share this:

IE00BK5C1B80,IE00BKTWZ675,IE00BF03XP94,XS2337100080,XS2472334403

Post correlati

Violeta-540x540-1.jpg
Violeta Todorova
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Violeta-540x540-1.jpg
Boyan Girginov
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Violeta-540x540-1.jpg
Sandeep Rao
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Violeta-540x540-1.jpg
Violeta Todorova
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Boyan Girginov
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Pawel Uchman
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.
Violeta-540x540-1.jpg
Sandeep Rao
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.

Violeta Todorova

Senior Research

Violeta se unió a Leverage Shares en septiembre de 2022. Ella gestiona la realización de análisis técnicos, investigación macroeconómica y de acciones, y ofrece información valiosa que ayuda a la definición de estrategias de inversión para los clientes.

Antes de unirse a LS, Violeta trabajó en varias empresas de inversión de alto perfil en Australia, como Tollhurst y Morgans Financial, donde pasó los últimos 12 años de su carrera.

Violeta es una técnica de mercado certificada de la Asociación Australiana de Analistas Técnicos y tiene un Diploma de Postgrado en Finanzas e Inversiones Aplicadas de Kaplan Professional (FINSIA), Australia, donde fue profesora durante varios años.

Julian Manoilov

Marketing Lead
Julián se unió a Leverage Shares en 2018 como parte de la principal expansión de la compañía en Europa del Este. Él es responsable de diseñar estrategias de marketing y promover el conocimiento de la marca.

Oktay Kavrak

Head of Communications and Strategy

Oktay se incorporó en Laverage Shares a fines de 2019. Él es responsable de impulsar el crecimiento del negocio al mantener relaciones clave y desarrollar la actividad de ventas en los mercados de habla inglesa.

Él vino de UniCredit, donde fue gerente de relaciones corporativas para empresas multinacionales. Su experiencia previa es en finanzas corporativas y administración de fondos en empresas como IBM Bulgaria y DeGiro / FundShare.

Oktay tiene una licenciatura en Finanzas y Contabilidad y un certificado de posgrado en formación empresarial de Babson College. También es titular de una certificado CFA (Chartered Financial Analyst).

Sandeep Rao

Investigación

Sandeep se unió a Leverage Shares en septiembre de 2020. Está a cargo de la investigación de líneas de productos existentes y nuevas, clases de activos y estrategias, con un enfoque particular en el análisis de eventos y desarrollos recientes.

Sandeep tiene una larga experiencia en los mercados financieros. Comenzó en un hedge fund con sede en Chicago como ingeniero financiero, su carrera abarcó varios dominios y organizaciones durante un período de 8 años, desde la División de Prime Services de Barclays Capital hasta (más recientemente) el Equipo Index Research de Nasdaq.

Sandeep tiene una maestría en Finanzas, así como un MBA del Illinois Institute of Technology de Chicago.

Gold Retreats But Rally is Not Over

Copper Ready to Explode

Q2 2024 Market Outlook: Rocky Road Ahead

What is an ETF? (Exchange Traded Fund)

How Do Leverage Shares ETPs Trade in Multiple Currencies

Currency Impact

Build your own ETP Basket
Leverage Shares: Europe’s top leveraged and inverse ETP provider.
Main ETP benefits
Common investor questions

Get the Newsletter

Never miss out on important announcements. Get premium content ahead of the crowd. Enjoy exclusive insights via the newsletter only.