Today's video focuses on Meta Platforms' (META -3.71%) earnings call, reported on Feb. 2 after the market closed. Meta Platforms' stock price dropped over 20% after hours after missing analyst expectations in specific vital metrics and providing weaker guidance than expected for the upcoming quarter. Here are some highlights from the video.
- The pricing of ads is expected to take a hit for numerous reasons. Currently, over 95% of total revenue comes from advertising. Therefore, any negative impact on pricing can heavily affect the company. The three main reasons for this impact are the changes in iOS tracking, macroeconomics like inflation and supply chains affecting advertising budgets, and current exchange rates making advertising unfavorable for international companies.
- Impressions of advertisements are also expected to go down. Meta Platforms is currently focusing on Reels, short video content. Unfortunately, Reels tend to have fewer impression rates, but management believes this will change over time. Competition from TikTok is also a headwind for the advertising business.
- Meta Platforms continues to have strong fundamentals: Revenue grew 20% year over year, it has over $48 billion in cash and short-term investment and no long-term debt, it purchased over $44 billion in shares during the year, and it had full-year free cash flow of $38 billion.
Click the video below for my full thoughts and analysis.
*Stock prices used were the after-hours prices of Feb. 2, 2022. The video was published on Feb. 2, 2022.
