META's Fall: Lessons for NIO's CEO Li Bin ?
On Thu, 25 Apr 2024, social media giant $Meta Platforms, Inc.(META)$ delivered its Q1 2024 earnings.
To me it is a stellar set of results in all honesty. (see below)
Meta - Q1 2024.
Revenue gained +27% YoY.
Net income gained +117% YoY.
Earnings per share gained +114% YoY.
It’s other key metrics were equally impressive and rightly so.
Otherwise its earnings would not have been that fantastic, overall! (see below)
Daily usage have grown by +7% YoY. This is a “hugh” number running into the billions.
Ad impression have increased by +20% YoY. This is a very important matrix to maintain or increase a company’s visibility on consumers’ radar.
Meta’s 2023 staff layoff has resulted in headcounts reduction, amounting to 10% of total staff strength; where salaries could run into the millions of dollars.
Summary
It was a concerted effort by the social media giant to increase revenue and decrease expenditure simultaneously that resulted its stellar performance.
Stock Price Tumble.
Yet, in the midst of a stellar report card - when Meta resumed trading on Thu, 25 Apr 2024, the stock tumbled. (see below)
Meta’s results were announced on Wed, 24 Apr 2024 after market has closed.
On Thu, 25 Apr 2024 when trading resumed, it fell by -12.22% to close at $441.38 per share.
At one point it fell to $410.66 per share.
What Caused The Fall?
If there is anything that bugs US market, it will be either (a) overdrive spending and/or (b) a weak outlook.
In the case of Meta, it was both conditions.
Personally to me it was the sequence of events’ announcements that was ill-delivered.
(1) Overdrive Spending.
CEO Mark Zuckerberg started Meta’s earnings call by talking about artificial intelligence (AI).
Then he moved to metaverse, touting his company’s headsets, glasses and operating system.
Next he spoke about Llama 3, Meta’s newest large language model, and Meta AI - its answer to OpenAI’s ChatGPT.
He also gave an insight into Reality Labs (Meta’s division) that houses company’s Metaverse hardware and software development centre.
He failed to elaborate how these new tools are going to help add revenue for the company.
In short, he spent the entirety of his opening remarks focused on the many ways Meta loses money.
(2) Q2 2024 Outlook.
Zuckerberg did anticipate that Q2 2024’s revenue would be coming in between $36.5 billion and $39 billion.
This will be slightly off the midpoint of Wall Street’s expectations of $38.24 billion.
Talk of Q2 2024 earnings might be “lost” as investors were likely spooked by the billions that Meta has earmarked to spend in 2024 and even coming years.
All these huge expenses to finance its deeper penetration into AI and Metaverse.
All the above spoken will not sit well with anyone listening to Zuckerberg’s overwhelming speech:
In the midst of a persistent US inflation that won’t budge.
And a world with 2 “major” on-going wars in Europe & Middle East;
My viewpoints : (NIO’s Learning Lessons).
I wonder if $NIO Inc.(NIO)$ CEO, Mr William Li Bin sit in on US’s IT giants’ earnings calls?
Did he learn anything from the recent Meta’s saga?
How investors’ sell down reaction clearly show how they feel about Meta’s future spendings; especially in Metaverse, that is a “deadend”.
Was Mr Zuckerberg successful in delivering his “big picture” and gets everyone excited and support it ?
Or perhaps the $Tesla Motors(TSLA)$ epic disaster - quarterly earnings:
Yet, Mr CEO cum salesman Musk was able to sell the vision of (a) a budget EV to debut in 2025, (b) autonomous driving and (c) its robotaxis.
These are future concepts with an open-ended timeline.
Both Tesla’s and Mr CEO’s are not known to keep to timeline and releases.
Yet the story teller was able to get everyone excited and started the stock’s rally again despite a disaster earnings that fell > -50%. (see below)
Does NIO’s CEO, Mr William Li Bin has clarity that:
He needs to drive up demand for NIO’s EVs, for Onvo EVs (May launch) and for Firefly EVs (early 2025).
He needs to keep his workforce - lean & mean.
He needs to build his products around NIO’s EV and batteries and not good-to-have like mobile phone that has little to zero value proposition: just like Meta’s persue of metaverse.
Equally important, he needs to rein in NIO’s research & development costs that has increased by +23% (for FY 2023) to US$1.892 billion.
Judging by the latest news (see above), it seems as though Mr Li Bin is aware of the benefits of collaboration ?
In a country vast as China, NIO could afford to share this Big piece of pie on battery swapping with more partners.
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Do you think Meta has more room to fall before it finds its support level / price ?
Do you think NIO’s CEO will be able to observe and learn from other people’s mistakes and avoid them himself?
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