Facebook parent company Meta plummets 20pc on earnings miss

More than $US200bn has been wiped from the Facebook owner’s valuation, amid slowing growth and an ongoing battle with Apple.

Meta shares slump after its earnings results disappointed the market. Picture: Mandel Ngan/Pool/AFP

Shares in social media giant Meta tumbled by more than 20 per cent in after hours trading, after the company reported slowing growth and its earnings came in at below expectations for the fourth quarter.

More than $US200bn was wiped from Meta’s valuation, after it posted earnings per share of $US3.67 compared to analyst consensus expectations of $US3.84. Its daily active users and monthly active users were also below expectations.

Meta, formerly known as Facebook, said it’s grappling with a number of issues including inflation, supply chain disruptions with its advertisers and privacy changes implemented by Apple, affecting iPhone users.

Apple‘s changes, which allow users to more easily control which apps can track their activity, have made it harder for brands to target and personalise ads towards users on Facebook and Instagram.

“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetise at lower rates than Feed and Stories,” Meta said in a statement.

The results were the first for Facebook since it changed its parent company name to Meta, reflecting its new priorities of building the ‘metaverse’ - a 3D digital world accessed through virtual and augmented reality.

Meta posted a profit of $US10.3bn for the forth quarter - below analyst expectations of $US10.9bn, marking its first decline in net income growth since the second quarter of 2019. Its Reality Labs unit, which is its augmented and virtual reality arm, posted a $US3.3bn loss in the first time the company broke out its results.

CEO Mark Zuckerberg had previously said Reality Labs would not be profitable “any time in the near future.”

Meta last traded at $US254.7. Its fall has wiped out more than $US200m of its market value, while rival social media app Snap fell by 17 per cent in after hours trading.

Meta’s share price is now down 35 per cent from its all-time high of $US383 in September 2021, when the company’s market value hit $US1 trillion.

The results come amid renewed regulatory and legal action facing Meta globally, as regulators move to crackdown on the company‘s perceived market dominance and how it handles misleading and harmful content.

As first reported by The Australian, Meta is facing lawsuits in Australia and California from billionaire Andrew ‘Twiggy’ Forrest over claims it allowed cryptocurrency fraudsters to exploit its platform, defrauding Australians of hundreds of thousands of dollars.

Analyst for investment platform eToro Josh Gilbert said it appears Facebook is struggling to attract new users with younger demographics turning to apps such as TikTok and Snapchat.

“To add insult to injury, Meta Platforms offered nothing to stem the bleeding with its weak Q1 guidance. It also seems that Apple’s IOS changes are beginning to affect Meta Platforms’ growth, as advertisers struggle to track and identify users,” he said.

“Meta Platforms is now the cheapest mega-cap tech name, trading at 24 times earnings. This valuation has priced in the antitrust and regulatory headwinds it has faced over the past 12-18 months. Of course, Meta Platforms has the ‘Metaverse’ growth potential on its side, however, these investments are unlikely to contribute in the near term and could take several years to come to full fruition.

“In the short term, Meta Platforms needs to focus on sales growth and growing users in order to please Wall Street analysts. Instagram is anticipated to play a crucial role in this effort, given its ‘reels’ feature that can rival TikTok.”