What Is It About Facebook And Spotify That Is Getting Them Hammered In After-hours Trading?
What is it about Facebook and Spotify that is getting them hammered in after-hours trading?
If you own stocks, the bad news is that you have almost certainly just experienced a loss of capital.
After-hours trading for Meta, better known as Facebook, has seen the stock drop by more than 20%. Following the close of trading today, Spotify, the music streaming behemoth and podcasting powerhouse, has seen its stock price fall by more than 15 percent. Both companies' stock prices have plummeted as a result of PayPal's disappointing earnings reporting, which also resulted in the stock price plummeting, and Alphabet's unexpectedly excellent earnings.
Because of Alphabet's strong fourth-quarter performance, the company is starting to look more like an outlier than a median signal.
To figure out what's going on, let's start with Meta and then move on to Shopify to see what happens.
The company's pricey quarter and sluggish guidance were disappointing.
On revenue of $33.67 billion, Facebook generated operating income of $12.59 billion and net income of $10.29 billion in the fourth quarter of 2013. In addition, the company recorded a $3.67 earnings per share for the quarter ended December 31.
What was the performance of the results in compared to analyst expectations? According to projections from Yahoo Finance, analysts predicted revenue of $33.41 billion and earnings per share of $3.84 billion for the fiscal year. As a result, while missing out on per-share profit, Facebook managed to maintain a robust top line.
However, the profits shortfall was not merely a matter of a few cents per share; it represented a much larger problem for the corporation as a whole. Consider the following year-over-year comparisons as an illustration: a. Meta made $12.76 billion in operating income in the fourth quarter of 2020, accounting for approximately 46 percent of its total revenue in the same quarter. In the most recent quarter, the latter figure fell to just 37 percent, representing a significant decline. Such a precipitous decline in operating profitability is inexcusable.
In addition to the growing costs that are undermining Meta's profitability, the company's virtual reality (VR) or so-called metaverse activities are included.
According to a Facebook press release, Reality Labs produces "augmented and virtual reality-related consumer devices, software, and content." The division generated $877 million in sales during the most recent quarter, an increase from $717 million in the fourth quarter of 2020. However! Reality Labs' operational loss in the fourth quarter of 2021 was $3.3 billion, a considerable increase from the $2.1 billion loss in the same quarter of the previous year.
For the most part, Meta's metaverse effort has not yet proven to be the goldmine that the company's principal business has become over time. And the absence of immediate profit is having a negative impact on the overall performance of the organization. A long way from becoming the shithole-gold-averse that the company, according to reports, expects it to become over time.
If we look to the future, Meta's status will deteriorate further. As the company's chief financial officer predicted, total revenues will be in the range of $27-29 billion in the first quarter of 2022, corresponding to an annual growth rate of 3 percent to 11% in the first three months of the year. This is not something that should be done. Analysts predicted that Meta would produce a top line of $30.14 billion in the first quarter of 2022, making the company's forecast terrible.
Spotify's lumps
With the exception of the Joe Rogan situation, Spotify has had a challenging week. During regular trading hours, the company's stock price fell by 5.75 percent, but after-hours trading saw it lose a double-digit percentage of its worth.
Why? As a result, the company outperformed expectations in terms of earnings, losing over 50% less per share than the market anticipated. Its revenues of €2.69 billion were a few basis points higher than the company's expectations for the fourth quarter of 2021.
Despite this, it continues to be shattered. Why? The problem, as with Meta, is that it is concerned with the future.
It is anticipated that Spotify's monthly active user base will expand from 406 million at the end of 2021 to 418 million in the first quarter of 2022. Additionally, it expects to increase its paid user base from 180 million to 183 million in the next three months, according to the company.
How far off the mark are such projections, exactly? Approximately 185.3 million paying subscribers and 422 million monthly active users were expected in the first quarter of 2022, according to SeekingAlpha. Because of this, while Spotify's performance in the most recent quarter was strong, investors are less than bullish about the company's long-term prospects.
I can't recall a moment when we've seen so many Internet enterprises go afoul of the investing public as we have in recent weeks. It is required to do additional meta-analyses, but it appears as though the shift in the wind for technology businesses is not exclusive to SaaS companies or recent IPOs. A large number of people are succumbing to the stick.
