What happened
Shares of Facebook parent company Meta Platforms (FB +2.48%) were absolutely slammed on Thursday, losing about one-fourth of their value. The stock fell as much as 26.6% but is down about 25% as of 11 a.m. ET.
The stock's pullback is directly related to Meta Platforms' fourth-quarter update, which featured slowing revenue growth and an earnings miss, as well as a first-quarter outlook that was far below what the Street was hoping for.
A chart showing a stock price decreasing.
So what
Facebook said its fourth-quarter revenue increased 21% year over year to $33.7 billion. This compared to 35% year-over-year revenue growth in the third quarter of 2021. The deceleration was expected, as the company had warned of a tough year-ago comparison, challenges from recent changes to Apple's iOS ad tracking, and some ad budget headwinds due to supply chain issues. Earnings per share for the period decreased 5% year over year to $3.67, missing analysts' average forecast for $3.84.
The main drag on the tech stock on Thursday is likely what management said about its expectations for the first quarter. Management guided for just 3% to 11% year-over-year growth during the period. Some of the main expected challenges during the period are Apple's iOS ad tracking and measurement changes, a tough year-ago comparison, and foreign currency exchange rates.
Now what
CFO Dave Wehner is known for being conservative about forecasts. Indeed, many of his expectations for significant revenue decelerations in the past never fully materialized. So investors should view Meta's first-quarter guidance as conservative. Nevertheless, the degree of the company's expected deceleration is concerning -- and investors should watch to see how reported revenue in Q1 actually fairs.
