What happened
Shares of Meta Platforms (META 2.98%) were up over 2% after the market open this morning, as the market started to price in the possibility of a better-than-expected upcoming earnings report. As of 11:32 a.m. ET on Wednesday, Meta shares were up 1.8%, ahead of the S&P 500 index's intraday loss of 0.15%.
Worries over slowing growth amid a weak advertising market have sent Meta's stock price down 60% year to date. Meta will report third-quarter results on Oct. 26. Can the social media giant to turn things around?
So what
Social media companies have been hurt by economic uncertainty and increasing competition as more companies move ad spending online. Snap saw revenue decelerate rapidly this year and announced in August it would lay off about 20% of its full-time employees. Meta surprised investors when it reported a year-over-year decline in revenue last quarter.
Meanwhile, Amazon grew its advertising revenue by 21% year over year in the second quarter. Advertisers don't have to rely on social media platforms to get their brands in front of consumers.
Now what
It may get worse for social media in 2023, especially if the economy falls into a recession, causing advertisers to further pull back on spending.
Still, expectations are already very low, so Meta could be a good contrarian investment. After all, the company's ultimate value rests on 2.8 billion daily active people across its family of apps.
The stock is cheap, but investors should be careful of more downside if the challenges of navigating a weakening economy persist. There's also the problem of Apple's ad restrictions on iOS, which has been a challenging curve ball that social media has yet to overcome.
