Meta - the technology winner of 2023?
The year 2022 was literally a disaster for Meta, when it wrote off two-thirds of its capitalisation. Investors are certainly not used to this kind of development - Meta was literally the best technology stock in history. However, the huge rise was replaced by a terrible fall. This was mainly due to investor impatience with Metaverse, which is proving to be a failed project. Thus, Meta was literally ahead of its time, and while Metaverse may be the music of the future, the world may not be ready for it at the moment. Let's recap the company's last published results, for the third quarter of 2022.
3Q revenues were down 4.5% year-on-year, mainly due to a decline in ad interest. The average price per ad fell 18% year-on-year, but Alphabet and Snapchat reported similar trends. However, the aforementioned companies do not have a ball at their feet called Metaverse. The latter is proving to be a literal money-burner. Meta has already invested over USD 30 billion in it and the investments are expected to grow this year. According to estimates, Meta is expected to send over USD 19 billion into it this year, which is a huge amount. However, investor and user interest in the Metaverse is rapidly waning, something Meta apparently doesn't want to admit. However, abandoning the project would be a big loss, which Mark Zuckerberg is not used to. However, everything was not just negative - at least the figure discussing the number of daily active users was seen as relatively positive. This reached 1.98 billion. Instagram set a record, exceeding 2 billion daily active users for the first time in its history.
Meta shares in the MT4 platform on the D1 timeframe along with the 50 and 100 day moving averages
What to expect in the coming months?
Meta will announce its financial results for the last quarter of 2022 in early February. What can we expect? The last quarter is likely to be disappointing again, we expect a year-on-year decline in sales again. While these should reach a respectable USD 30 billion, the market was expecting up to USD 2 billion more. The last quarter of the year tends to be the best for both Facebook and Instagram due to the growth in interest in ads. However, Meta is facing competition in the form of TikTok, which is seeing huge growth in interest.
However, Meta is not slowing down and has brought the short video format to Instagram. The videos, called Reels, are enjoying a lot of user interest. In addition, Chinese TikTok is still facing regulatory pressure in the US. The weakening US dollar could also be a positive, boosting foreign sales. Towards the end of the year, Meta also announced broad layoffs (around 13% of the workforce), which were received rather positively by the market. The redundancies are expected to include employees working at Metaverse. Thanks to the factors mentioned, Meta could be one of the technology winners of 2023, but again we can expect a lot of volatility.