Recent Financial Report:
The company recently released its financial report for the fourth quarter of 2022. The data showed that the operating revenue for the quarter was $32.165 billion, down 4% year-on-year. I think although it was lower than the 7% expected by analysts, it still did not reach the forecast of $31.65 billion. In addition, the quarterly dilution income per share (EPS) was $1.76, down 52% year-on-year, far lower than analysts' expectations of $2.22. Meta's stock price soared by about 20% after the performance was announced. I think that stocks that have fallen a lot now are prone to retaliatory rebound as long as their performance is announced as they are not as bad as market expectations. This is also the script needed for roll-selling.
Let's take a look at Meta's performance. Their total revenue in the fourth quarter was $3,165.65 billion, down 4% year-on-year, less than analysts expected 7%, and their earnings per share were $1.76, down 52% year-on-year, down from the expected $2.22. In terms of its two major business sections, Meta's social media and meta-universe-related businesses have exceeded expectations, but the profits of its social media have been greatly reduced, and meta-universe-related businesses have shown more serious losses. In terms of social media business, its "application family" includes Facebook, Instagram, Messenger, WhatsApp and other services, with a revenue of 31.4338 billion US dollars in the fourth quarter, down 4.1% year-on-year and a profit of 10.68 billion US dollars. Yuan, down 33% year-on-year. In terms of meta-universe-related business, the revenue of "Reality Laboratory" was $727 million, a year-on-year decrease of 17.1%, with a loss of $4.28 billion, an increase of 29.5% year-on-year.
On this topic, my point is that although Meta's performance exceeds the analyst's expectations, I think there are still some challenges that management needs to continue to work hard to solve. Especially in terms of the profits of social media business, higher profits need to be achieved by improving business strategies and cutting costs. At the same time, for the "realistic laboratory", I think it is more necessary to pay more attention to the development of mature technology and business models.
Diversitification Attempts:
Next, I think it is worth mentioning that the advertising business performed well in the fourth quarter, with operating revenue of $31.254 billion, down 4.2% year-on-year, but an increase of 14.7% over the revenue in the third quarter. Analysts expect to decrease by 5.5% year-on-year to $30.86 billion. In the fourth quarter, the advertising impressions increased by 23% year-on-year, expected to increase by 13.5%, while the average price of unit advertisements decreased by 22% year-on-year, expected to decrease by 17.2%. The average income per user (ARPU) in the fourth quarter was $10.86, the highest level in 2022, down 6.1% year-on-year, roughly equivalent to the third quarter, with a year-on-year increase of 15.4%.
I think this has somewhat become one of the reasons for the sharp rebound of Meta's stock price. I think Meta performs well in the advertising business, mainly because it has a large number of active users and provides a platform to attract advertisers. At the same time, Meta's average income per user is also very satisfactory, which not only reflects Meta's competitiveness in the advertising market, but also Meta's success in serving users. However, I personally observe that with the increasingly fierce competition, Meta still needs to constantly innovate to ensure Meta's position in the advertising market.
User Growth and Distribution
On the other hand, in the important user index, we can learn from the financial report that the overall number of active users of Meta social media in the fourth quarter exceeded expectations. Among them, Facebook's daily active users (DAU) reached 2 billion for the first time, but the number of monthly active users (MAU) was slightly lower than expected. By the end of the fourth quarter: the average daily active users (DAP) of the application family was 2.96 billion, an increase of 5% year-on-year, and analysts expected 2.92 billion. The average monthly active users (MAP) of the application family is 37.44 billion, an increase of 4% year-on-year, and On the other hand, in the important user index, we can learn from the financial report that the overall number of active users of Meta social media in the fourth quarter exceeded expectations. Among them, Facebook's daily active users (DAU) reached 2 billion for the first time, but the number of monthly active users (MAU) was slightly lower than expected. By the end of the fourth quarter: the average daily active users (DAP) of the application family was 2.96 billion, an increase of 5% year-on-year, and analysts expected 2.92 billion. The average monthly active users (MAP) of the application family is 37.44 billion, an increase of 4% year-on-year, and analysts expect 37.71 billion. Facebook's DAU is 2 billion, an increase of 4% year-on-year, an increase of more than 70 million compared with the same period last year, and analysts expect 1.98 billion. Facebook's MAU is 2.96 billion, an increase of 2% year-on-year, and analysts expect 2.98 billion.
I think the growth of the overall number of active users is the main catalyst for Meta's surge, because social media relies on active users to generate advertising revenue and support from other sources of revenue. So I personally believe that the market's reaction is because this cycle is exciting. Generally speaking, Meta's financial data shows that it still has many challenges, but it also shows its healthy user growth trend. In the future, the company needs to strengthen the steady growth of its profits while maintaining its strong user base. expect 37.71 billion. Facebook's DAU is 2 billion, an increase of 4% year-on-year, an increase of more than 70 million compared with the same period last year, and analysts expect 1.98 billion. Facebook's MAU is 2.96 billion, an increase of 2% year-on-year, and analysts expect 2.98 billion.
I think the growth of the overall number of active users is the main catalyst for Meta's surge, because social media relies on active users to generate advertising revenue and support from other sources of revenue. So I personally believe that the market's reaction is because this cycle is exciting. Generally speaking, Meta's financial data shows that it still has many challenges, but it also shows its healthy user growth trend. In the future, the company needs to strengthen the steady growth of its profits while maintaining its strong user base.
It's AI investing:
In terms of outlook, Meta's latest performance guidelines predict that the revenue in the first quarter is expected to be between $26 billion and $28.5 billion, and the average is consistent with the analyst's expectation of $2.725 billion. Meta said that the impact of the exchange rate in the quarter will reduce the total revenue by 2 percentage points year-on-year. It is estimated that the annual cost in 2023 will be $89 billion to $95 billion, down $5 billion from the previous guidance range of 94 billion to $100 billion, lower than analysts' expectations of $95.66 billion; annual capital expenditure is 30 billion to 330 billion. Billion US dollars, down $4 billion from $34 billion to $37 billion from the previous guidance range, lower than analysts' expectations of $34.335 billion. Meta said that basically all capital expenditure will continue to support the application family. The expenditure reduction guidelines reflect the plan to reduce the expenditure related to the construction of the data center. The company turned to the new data center architecture, which has a higher cost utilization rate and can support both artificial intelligence (AI) and non-AI workload.
Small summary
In this guide, Meta said that they will continue to support the application family while switching to the new data center architecture. I think this is a wise choice because it is the most cost-effective. In fact, I still have something to do with Meta, especially the cost of the funds it invests in the meta-universe is too high and the unknown is also large. However, on the technical side, the stock price has fallen a lot, and the rebound will continue, plus the $40 billion stock repurchase incentive announced by the management. I think the short-term market psychological resistance area is about $200, and the support area is about $148-150.
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