Source: PaxForex Premium Analytics Portal, Fundamental Insight
Meta Platforms investors are still recovering from the stock's colossal drop after last quarter's earnings report. The social media company fell short on some key metrics, but it was the 2022 outlook for the first quarter that really sent the stock into a downward spiral. How big of a shock was it? The day after the earnings release, Meta suffered the biggest loss (measured in market capitalization) in the history of the U.S. stock market.
In the fourth quarter of 2021, Meta's earnings per share were below projections, while earnings barely exceeded projections. More troubling still, the number of daily active users on the company's main Facebook platform declined consistently, and first-quarter earnings guidance was well below analysts' consensus forecasts.
Meta plans to report its next earnings on April 27, and Wall Street will undoubtedly be watching closely. Ahead of that event, the following metrics are worth watching:
- Total Revenue
Total revenue is always an important metric that illustrates how much business goes through the company before expenses and other deductions. For Meta, like other large companies, there is a lot of uncertainty in the first quarter because of geopolitical tensions. Further consequences from Apple allowing users to block apps that track their usage will also affect Meta's earnings.
Nevertheless, if there is a silver lining, both of these negatives are known and should be technically built into investors' expectations.
For some context, before the report came out, Meta projected that first-quarter revenues would grow 3% to 11% year-over-year.
- Management's Forecast for Full-year Expenses
Operating expense guidance was a hot topic in Meta's latest report. The company reported that its reality labs segment spends about $10 billion annually. As Meta plans to continue to invest aggressively in the metaverse, investors will look to the company's full-year operating expense forecast to see if management's previously stated 2022 total spending forecast of $90 billion to $95 billion was aggressive or if management will maintain that range (or worse, increase it).
Of course, Meta is a free cash flow machine. So it can't be said that it can't afford to reinvest money aggressively. But as long as its reality labs segment generates only paltry income relative to its expenses, investors can hope that the company can demonstrate greater spending discipline throughout its consolidated business in the future.
- Reality Labs Earnings
Finally, the market will be watching for continued revenue growth from the Reality Labs segment. This division includes metaverse equipment such as Oculus headsets, as well as software and other services related to the augmented and virtual reality market. Unless this division's revenues grow rapidly, the market will become increasingly critical of the huge spending of this segment.
Meta's revenues from Reality Labs grew 22% year over year in Q4 and about 100% between full 2020 and full 2021. Investors are likely hoping Meta's first-quarter revenue growth rate for Reality Labs will be at least in the same range as last quarter.
Meta will report its first-quarter financial results after the market closes on Wednesday, April 27.
As long as the price is below 237.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 216.98
- Take Profit 1: 207.60
- Take Profit 2: 185.00
Alternative scenario:
If the 237.00 level is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 237.00
- Take Profit 1: 270.00
- Take Profit 2: 299.00
