Meta Stock Plummets 10% Despite Stellar Earnings: What Caused the Market’s Reaction?
Meta Stock Tanks 10% Despite a huge earnings beat.
Meta exceeded Wall Street’s expectations once more in its first-quarter earnings release on Wednesday afternoon, but it also stated that growth will halt significantly, sending its price skyrocketing. ( Meta Stock )
KEY FACTS ( Meta Stock )
Meta generated $36.46 billion in sales during the quarter, easily above expectations of $36.14 billion and 27% higher than the same period last year.
Its earnings per share of $4.71 broke forecasts of $4.32, and its net income of $12.4 billion outperformed expectations of $11.4 billion.
The first-quarter numbers are remarkable, but investors were disappointed when Meta said it expected second-quarter revenues of $36.5 billion to $39 billion, with a midpoint outlook of $37.8 billion, well below average analyst estimates of $38.3 billion, according to FactSet. ( Meta Stock )
The business also revised its full-year expense projection, citing rising costs in its disfavored metaverse segment, undermining Meta’s efficient growth story that has buoyed the stock over the last year and a half. Meta stock plunged 10% in limited afternoon trading, hovering around $440 per share, its lowest price since February 1 if the losses continue into Thursday’s normal session. ( Meta Stock )
Meta’s dramatic profit growth is expected to slow this year.
KEY BACKGROUND
To be clear, Meta is primarily an advertising firm, not a social media or metaverse one; ads account for approximately 99% of Meta’s total revenue. Meta’s strong performance in the first quarter underlines the social media giant’s spectacular turnaround in recent years. After five consecutive quarters of negative year-over-year earnings growth from the fourth quarter of 2021 to the fourth quarter of 2022, Meta has returned to eye-catching profitability. Meta’s stock, which had fallen from a peak of almost $380 per share in September 2021 to less than $90 by November 2022, unexpectedly reached a new high of $531 earlier this month. ( Meta Stock )
For those keeping score at home, that’s an 80% drop in 14 months, followed by a more than 500% rally in the next 17 months. Meta, which rebranded from Facebook in 2021, saw an initial selloff alongside a broader stock market selloff, as investors viewed the company’s cash-burning growth into augmented and virtual reality, or the metaverse. Its comeback occurred as ad spending remained resilient as the United States dodged the devastating economic crisis many predicted and the market gained ground, but Meta has proven particularly appealing for its commitment to keeping expenses low while significantly increasing its top line. ( Meta Stock )
Surprising fact
Last quarter, Meta reported another $3.8 billion loss in its metaverse division, bringing the unit’s operating deficit to about $37 billion throughout its 2.5-year lifetime.
$172.7 million is a significant amount. That is how much Zuckerberg, who owns almost 13% of Meta, will receive from his company in its next dividend payment due to his 345.5 million shares in the company. It’s a huge win for Zuckerberg, who earned a modest $1 salary and $24.4 million in supplemental compensation in 2023, the latter of which was primarily for security for himself and his family.
FORBES VALUATION
Zuckerberg’s nine-figure dividend payment pales in comparison to his overall fortune, which Forbes valued at around $173 billion as of Wednesday’s market close, ranking him as the world’s fourth richest person. He’s more nearly $125 billion richer than he was at the end of 2022, when he was only the 26th wealthiest person, thanks to Meta stock’s spectacular comeback. ( Meta Stock )
