What happened
Shares of Facebook parent Meta Platforms (META 0.08%) rose by as much as 3.5% Friday morning, and were still up 0.8% as of 11:55 a.m. ET.
The social media company likely got a boost from an upbeat early morning for the Nasdaq Composite, which was initially up by more than 1%, but was down by more than 1% just before noon. Additionally, Meta shares may be rebounding a bit from a brutal sell-off that has pushed the stock down by more than 40% year to date.
So what
Investors have been worried about Meta's slowing revenue growth rate and losses from its Reality Labs segment, which includes its augmented and virtual reality products and services.
Meta's first-quarter revenue increased just 7% year over year, down from 20% growth in the fourth quarter and 37% growth in 2021 overall. Its top-line growth has been negatively impacted by an ongoing shift in user attention to products with lower monetization rates, such as the company's TikTok-like Reels product. Additionally, demand has softened from certain ad verticals that are experiencing greater uncertainty related to the war in Ukraine and global supply chain challenges. Finally, a recent change to Apple's iOS that enhanced its user-privacy protections has negatively impacted ad tracking and measurement. That continues to affect Meta Platforms as it attempts to adjust its advertising products to address this new challenge.
Meta Platforms CEO Mark Zuckerberg. Image source: Meta Platforms.
Now what
With Meta Platforms' stock now trading at a relatively conservative valuation of just 14.7 times earnings, some investors may think the stock's decline has gone too far. After all, Meta management has indicated that it expects to eventually work through some of its current problems. Further, while the company's Reality Labs segment lost almost $3 billion in the first quarter alone, management is optimistic that it has great potential over the long term.
