Meta shares plunge after disappointing earnings

Facebook Chairman and CEO Mark Zuckerberg testifies at a House Financial Services Committee hearing in Washington, DC, October 23, 2019.

Erin Scott | Reuters

Stock Meta fell 6% on Thursday, the day after the company posted earnings for the second quarter what is missing in the top and bottom lines.

Meta’s revenue is down nearly 1% year-over-year, and the company’s shares have lost roughly half their value since the start of 2022. Meta also posted a disappointing third-quarter guidance, with CEO Mark Zuckerberg said in a phone call with analysts that the company will cut headcount as it prepares for an economic downturn.

“This period requires more intensity, and I expect that we can do more with less resources,” Zuckerberg said. He added that “the economic downturn will have a big impact on the digital advertising business,” which has already been hit by changes to Apple’s privacy policy. Meta said in February that Apple’s app tracking transparency feature would lead to Revenue reached $10 billion this year.

Zuckerberg is promoting short videos by investing in Reels, which has reached $1 billion in annual revenue. However, the product is not as effective in generating money as Instagram Stories and the main news feed.

“The Reels Monetization Disaster Seems Slow” This was stated by UBS spokesman Lloyd Walmsley. in a note to investors. “Given the magnitude of the product changes underway, we think investors should hear a clear and significant improvement in the time it takes to get comfortable.”

Nevertheless, JMP analysts are optimistic about the future of Reels.

“As Meta makes progress with Reels while AI improves content and ad recommendations, we expect growth to recover from current levels while the company becomes more disciplined in its cost structure,” they wrote in note on Thursday.

Analysts at Canaccord Genuity said Wednesday that fears of a looming recession may continue to weigh on the company’s digital advertising market in the short term, but improvements at Reels could help it recover.

“Improved reel monetization and continued efforts to mitigate privacy changes should help accelerate the recovery once this period of macro uncertainty subsides,” they said.

Meta, the parent company of Facebook and Instagram, posted its earnings a week after the competition. Click as well as Twitter also reported disappointing second quarter results. The executives mentioned the economic and mobile platform challenges that have infiltrated the online advertising market, as well as competition from the short video sharing app TikTok.