Time running out for Meta to restore confidence as TikTok grows

(Alliance News) - Meta Platforms Inc became the latest tech stock to unnerve investors, and with competition from TikTok and no sign of relief when it comes to advertising revenue, there could more difficult times ahead for the Facebook owner.

Meta late Wednesday said revenue fell 4% to USD27.71 billion in the three months that ended September 30 from USD29.01 billion a year before. Income from operations dropped 46% to USD5.66 billion versus USD10.42 billion. Net income was USD4.40 billion, down 52% versus USD9.19 billion.

Meta shares were trading 23% lower at USD99.59 each in New York on Thursday afternoon.

"We are not surprised shares are down given a mixed print and myriad structural concerns facing the company," analysts at UBS said.

GAAP advertising revenue weakened to USD27.24 billion from USD28.28 billion a year earlier.

Advertising spend weakens during downturn, hurting top-lines of social media firms with vast advertising space.

Analysts at Wedbush commented: "Meta's results last night was an absolute train wreck that speaks to pervasive digital advertising doldrums ahead for Zuckerberg & Co as they make the risky and head scratching bet on the metaverse."

Meta may need to go to great lengths to restore the market's confidence, AJ Bell analyst Laith Khalaf commented.

"Radical action might be required to win back the market. This could include spinning off the metaverse assets and potentially asking users to pay for some features on WhatsApp, Instagram, and Facebook. Though Meta must tread carefully here given the competitive threat posed by the likes of TikTok," Khalaf said.

Meta is not the first tech stock to disappoint this term.

Snapchat owner Snap Inc spooked markets last week.

Revenue in the third quarter of 2022 was 5.7% higher year-on-year at USD1.13 billion, but its net loss widened to USD359.5 million from USD180.8 million.

There were fears that Snap's worrying report could be a sign of things to come for US tech firms. So far those concerns have been correct.

Google owner Alphabet Inc late Tuesday reported a sharp fall in quarterly income on higher costs and foreign exchange headwinds, with markets reacting negatively to the news.

Wedbush noted hopes for big tech now rest on Apple Inc.

Wedbush analysts explained: "Big Tech hopes rest on Apple's shoulders. For Apple tonight we expect some spots of softness but overall Cupertino should be able to buck the trend seen so far during tech earnings season from Big Tech and report generally positive September results with no major cracks in demand heading into holiday season. We view this as a seminal print for Apple as the Street gauges the underlying demand for iPhone 14 and is able to finally decipher a very noisy few months with many skeptics poking holes in the growth story."

By Eric Cunha; [email protected]

Copyright 2022 Alliance News Limited. All Rights Reserved.