Facebook Parent Meta Shares plummet after company warns of ‘weak ad demand’

Topline

Facebook parent company Meta saw its shares plunge in after-hours trading on Wednesday after second-quarter results fell short of expectations, with investors particularly spooked by the company’s weak revenue forecast and struggling to online advertising.

Highlights

Shares of Meta plunged more than 3% immediately after the results announcement, paring gains from the start of the session, when the stock rose more than 6% before the results.

Meta posted quarterly revenue of $28.8 billion and earnings of $2.46 per share, versus $28.9 billion and $2.59 per share expected by analysts, according to Refinitiv.

User growth at parent Facebook, meanwhile, was broadly in line with expectations, with the company reporting 1.97 billion daily active users and 2.93 billion monthly active users.

Several Wall Street analysts have warned that the company faces an “uphill battle” for the rest of the year as its online advertising business continues to struggle thanks to iOS privacy update. Apple and a more difficult economic environment, which has affected advertising budgets.

Meta cut its third-quarter revenue outlook, now forecasting between $26 billion and $28.5 billion, down from analysts’ expectations of around $30.5 billion, according to Refinitiv data.

Beyond its online advertising business, Meta continues to face increased competition for users from rival social media platforms such as TikTok, while the company has also continued to spend billions of dollars on its project. of augmented reality, the metaverse.

Crucial quote:

Meta’s soft guidance speaks of an “uphill battle on Everest” as Apple iOS privacy issues “continue to come to the fore” with a tougher economic environment, said Dan Ives, analyst at Wedbush. “The bifurcation of the tech space continues into the June earnings season.”

Key context:

Meta has lost about half of its market value this year, with the stock falling 50%, amid the market selloff that has hit the tech sector particularly hard. Like other big tech companies, Meta has recently slowed hiring as recession fears continue to weigh on markets. The company noted that it faced “a weak advertising demand environment” throughout the second quarter, citing “wider macroeconomic uncertainty” as the driving factor. While most analysts remain optimistic about the company’s long-term growth, some remain cautious about the company’s “ability to sustain earnings” in a difficult near-term environment.

Big number: $61 billion

That’s what Meta co-founder Mark Zuckerberg is worth, according to Forbes‘ estimates.

Further reading:

Wall Street still loves big tech stocks: Analysts see even more upside ahead of crucial earnings week (Forbes)

Dow jumps 400 points after the Fed raised rates by 75 basis points (Forbes)

IMF warns of ‘gloomy outlook’ for global economy and cuts growth estimates (Forbes)

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