What happened
As of 11:19 a.m. ET on Friday, shares of Meta Platforms (FB 0.82%) are trading down 11.6% week to date, according to data provided by S&P Global Market Intelligence.
NASDAQ: FB
Key Data Points
A few things are contributing to Meta's slide, including competition from social media rivals like Snap (SNAP 5.51%), the company behind the popular Snapchat app, and a weak digital advertising market that is affecting all social networking platforms right now.
So what
In the fourth quarter of 2021, Snap reported revenue growth of 64% year over year, with daily active users up 20%. That is notably faster than Meta's daily active user growth of 8% in the fourth quarter.
For the first quarter of 2022, analysts expect Meta to have grown revenue by 11.6% year over year, down from the previous quarter's 20%. But note that Snap also reported a deceleration in growth in its latest earnings report for the first quarter of 2022. Snap said revenue grew 38% year over year, with daily active users also slowing to a growth rate of 18%.
Meta cited competitive pressures and economic headwinds affecting the advertising market for the weak results last quarter.
Image source: Getty Images.
Now what
During its first-quarter earnings call, Snap blamed slower growth on platform privacy changes -- alluding to Apple's stricter policies to protect users against advertiser tracking on iOS -- and economic headwinds related to inflation, geopolitical unrest, supply chain shortages, and labor disruptions. Clearly, these factors could hurt Meta's first-quarter results when it reports on Wednesday, April 27 after the market close.
At least one analyst, however, believes the bad news is baked in. Citigroup upgraded the stock recently to a buy rating with a $300 price target. But investors might want to take that prediction with a grain of salt.
With the broader market still in correction mode and Meta's revenue growth trending in a negative direction right now, investors could find themselves in a value trap. The stock is cheap, but it might be wise to see what Meta reports next week before buying shares.
