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Meta shares rise on increase in daily Facebook users

Facebook parent Meta’s first-quarter profit and daily user count beat Wall Street’s expectations despite the company’s slowest revenue growth since its IPO a decade ago. Shares rose sharply in after-hours trading.

Meta cut a sharp contrast with Google parent Alphabet, which on Monday reported what analysts called disappointing earnings, with earnings below Wall Street expectations. Google also reported a slowdown in revenue growth, but for Meta this appeared to have been mitigated by an increase in daily active users that was “enough to cover the shorts and propel shares higher,” senior analyst Jesse Cohen said at Investing.com.

“Nevertheless, it was a mixed report overall as the social media giant continues to grapple with slowing revenue growth and reduced ad spend in the current inflationary environment,” said Cohen.

Apple’s recent privacy changes to its iPhone software iOS have made it harder for companies like Meta to track people for advertising purposes, which is also putting pressure on the company’s revenue. For months, Meta has been warning investors that revenue can’t continue to grow at the breakneck pace they’re accustomed to, so it’s likely that the quarter’s single-digit revenue growth is already factored into investors’ expectations.

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Meta has warned investors that its earnings can’t continue to grow at the breakneck pace they’re used to.
REUTERS

CEO Mark Zuckerberg said in a conference call with analysts that the sales acceleration Meta experienced during the pandemic has now eased and the company will now “slow the pace of some of our investments” so it can continue to grow its profits. This primarily relates to Meta’s Reality Labs segment, which includes his futuristic “Metaverse” project. The company, which changed its name to Meta Platforms last fall, invested more than $10 billion in Reality Labs in 2021 — including its virtual reality headsets and augmented reality technology.

The company made $7.47 billion, or $2.72 per share, for the January-March period. That’s down 21% from $9.5 billion, or $3.30 per share, in the same period last year.

Revenue rose 7% to $27.91 billion from $26.17 billion — the slowest growth rate in a decade for the online advertising company, which generally reports double-digit revenue growth.

According to a poll by FactSet, analysts on average expected earnings of $2.56 per share on sales of $28.28 billion.

“Meta’s ad business continues to face some very real challenges,” said Jasmine Enberg, an analyst at Insider Intelligence. Facebook is no stranger to roadblocks, of course, but the iOS changes are the first direct threat to its ad business.”

Add to that competition from TikTok and changes in how people use social media that threaten Meta’s prospects.

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Revenue for the first quarter rose 7% to $27.91 billion from $26.17 billion — the slowest growth rate in a decade.
AFP via Getty Images

In another sign that Meta is trying to be more “TikTok-like,” Zuckerberg said during the call that users are starting to see “a lot of other interesting content,” aside from posts from friends, family, and accounts they’re on Facebook and Instagram follow as platforms transition to AI-powered recommendations. In the past, users only saw posts from accounts they followed, but TikTok has shown that artificial intelligence can be an effective recommendation engine, keeping people coming back for more.

Facebook averaged 1.96 billion daily active users in March 2022, up 4% year-on-year. While that’s a positive sign after last quarter’s decline, Insider Intelligence analyst Evelyn Mitchell pointed out that most of that growth came from outside the U.S. and Canada, making the company less cash.

Shares of the Menlo Park, Calif.-based company rose $32, or more than 18%, to $207 in after-hours trading on Wednesday. The stock took a hit this week on news of Elon Musk’s Twitter acquisition, ending regular trading down 3.3% at $174.95.

https://nypost.com/2022/04/27/meta-shares-soar-on-increase-in-facebook-daily-users/ Meta shares rise on increase in daily Facebook users

DUSTIN JONES

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