To The Moon

The parent company of Facebook, Instagram and WhatsApp, $Meta Platforms, Inc.(META)$ has released a terrible Q3 earnings after October 26, and the market was disappointed again and severely punished it.

The reasons for Facebook's decline in performance are also very intuitive.

• Q3's overall revenue was US $27.71 billion, down 4.5% year-on-year, slightly better than the market expectation of US $27.41 billion;
• GAAP's EPS was US $1.64, down 49% year-on-year, far worse than the expected US $1.89, and the worst since the epidemic.
• Among them, the revenue from social apps (mainly advertising) decreased by 3.6% year-on-year, which was basically the same as expected; Surprisingly, the revenue of VR Lab, which symbolizes metaverse, is only US $285 million, down 49% year-on-year, which is far lower than the US $400 million expected by the market.
• In terms of active users, MAU increased by 3.9% year-on-year to 2.96 billion, almost equal to market expectations; DAU increased by 4.9% year-on-year to 1.98 billion, which was almost the same as market expectations.

Several key points of this financial report:

First, User value gradually decreases.Active users continue to grow, although they also drop to single digits and obviously see the ceiling, but the revenue is declining. If the advertising revenue matches the active users, it will drop sharply.

Of course, it can't be ruled out that Facebook plays tricks and fakes the data of active users. After all, when this data declines, the market becomes more pessimistic about it (being competed for market share), which has been controversial in the market before.

Second, the passive terrible situation of the advertising industry sucks.There's no need to say much about it.$Snap Inc(SNAP)$,$Alphabet(GOOGL)$, etc. have proved this point. Most online advertisers began to shrink. On the contrary, META's own marketing expenses continued to increase by 6% year-on-year this quarter. Although the growth rate was lower than before, as long as the revenue expenses could not keep up with the marketing expenses, it would never make a positive contribution to the profit margin.

Advertisers retreat because they have more efficient channels, such as short videos. Therefore, industry competition has brought unprecedented irreversible pressure on Facebook.

Third, metaverse is far from mature.Q3 firstly halved the revenue of VR Laboratory, and the R&D expenses increased by 45% year-on-year. On the one hand, we can see that META is trying its best to retain talents and technology, on the other hand, its liquidity is declining. Metaverse? Hehe.

4. All business are perssimistic.Q4's revenue guidance is $30-32.5 billion, while the market consensus forecast is $32.2 billion, which is equivalent to the average being worse than expected. Among them, the market expectation has included the impact of 7% foreign exchange.

Looking at the overall situation, META seems to be burning down, its main business is facing tremendous pressure, the market competition is fierce, the new business has not taken shape at all, and it is still burning money to erode profits.

In this case, can it constitute an investment reason to shout that your PE is low? It won't …