Meta Platforms, Advertising Revenue Slowdown... Short-Term Stock Price Rebound Difficult

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] Meta Platforms (formerly Facebook) saw its stock price plunge sharply after announcing earnings guidance that fell short of market expectations. Securities experts advised taking a long-term perspective, noting that advertising revenue is unlikely to increase significantly in the short term.

On the 5th, Meta Platforms' stock price stood at $237.09. Following the announcement of earnings below market expectations on the 2nd and a lowered future earnings forecast, the stock price plummeted by more than 25%.

In the fourth quarter of last year, revenue reached $33.6 billion, a 19% increase compared to the same period the previous year. Operating profit decreased by 1.5% to $12.6 billion. Advertising revenue, the main source of income, saw a decline in growth rates across all regions for the second consecutive quarter, leading to reduced profits. North American advertising revenue was $15.1 billion, up 14.5% year-over-year, while Europe and Asia recorded $8.2 billion and $6.2 billion respectively, increasing by 19.8% and 31.5%. Total operating expenses rose approximately 37.8% year-over-year to $21.1 billion. Overall costs, including cost of sales, R&D, and marketing, increased, with litigation-related expenses rising particularly sharply.

The impact of Apple's changes to privacy regulations significantly reduced advertising revenue due to decreased targeting accuracy. Following Apple's iOS upgrade, apps ask users whether to allow information tracking for privacy protection, and the number of users refusing tracking is increasing. Researcher Hoyoon Jung from Korea Investment & Securities said, "The decline in advertising efficiency relative to advertisers' budgets has led to a significant drop in ad revenue. Although the company is making various efforts to resolve the issue, this could persist throughout the year, negatively affecting growth rates." Accordingly, Meta Platforms forecasted first-quarter revenue guidance of $27 billion to $29 billion, expecting a modest growth rate of 3% to 11%.

Inflation, supply chain issues leading to reduced advertiser budgets, and the shift to less profitable Reels collectively had a negative impact on earnings. Researcher Hyunji Lee from Eugene Investment & Securities explained, "As the company pushes the shift from traditionally high-profit feeds and stories to Reels, the number of ad impressions in North America decreased by 6% year-over-year. Since short-form platforms are becoming mainstream, if the transition to Reels takes hold, its contribution to profits could gradually increase."

For stock price recovery, revenue growth in new businesses is necessary. Meta Platforms separately disclosed the performance of Facebook Reality Labs, which oversees VR and AR. As of the fourth quarter, Reality Labs' revenue was $870 million, showing a significant increase compared to the previous quarter due to the holiday season. However, increased costs from investments such as R&D and cost of sales have kept it in a deficit. Researcher Hyunji Lee stated, "While it is positive that Meta is preparing to expand into the metaverse ecosystem from a long-term perspective, there are still many challenges to overcome in reality, so a conservative approach is necessary."

This content was produced with the assistance of AI translation services.