Meta Platforms
META
shares have tumbled 64.5% in the year-to-date period compared with the Zacks
Internet – Software
industry’s decline of 60%.
Meta’s share price performance reflects bearish sentiments amongst investors as the company expects declining revenues in the fourth quarter of 2022.
Revenues from Family of Apps (99% of total revenues) in the third quarter of 2022, which include Facebook, Instagram, Messenger, WhatsApp and other services, decreased 3.6% year over year to $27.43 billion.
This is due to a decline in its advertisement revenues, which represents 99.3% of Family of Apps revenues. In the third quarter of 2022, advertising revenues decreased 3.7% year over year to $27.24 billion and accounted for 98.3% of third-quarter revenues. The Family of Apps is the primary source of funding for Meta’s lofty metaverse dream, upon which the company is banking its future.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart
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Meta Platforms, Inc. Quote
Meta is facing the worst downturn in its operational history. Its ad revenue business is facing declining growth due to ad targeting-related headwinds created by
Apple
’s
AAPL
iOS changes.
Apple’s iOS changes have made ad targeting difficult, which has increased the cost of driving outcomes. However, measuring these outcomes is tough.
Also, Meta’s social media platforms are facing legal issues from global authorities due to the lack of user data protection and misuse of data. Back in September 2022, Instagram was slapped with a €405 million fine by Ireland’s data regulators for violating the European Union’s General Data Protection Regulation and failing to protect children’s information.
META, along with its other social media peer
Snap
SNAP
, is facing backlash from users due to child protection issues on the social networking platform.
Snap’s Snapchat platform announced new parental controls for its platform early this year to limit friend suggestions for teen users and protect them from unwanted attention.
Snapchat’s recent initiatives come following allegations that the company has been failing to prevent drug-related content from proliferating its chatting platforms, specifically among its users aged below 18.
In order to deal with child protection and user data protection issues, META has been investing heavily in AI to attract more users to the platform and increase top-line growth to meet its future goals of creating the metaverse upon which the company is banking its future.
Meta Platforms is launching features like protections against malicious links in Facebook messenger and Instagram direct messages using automated systems, Instagram impostor alerts and increased Instagram verified badge specialty.
META also announced the introduction of age verification technology to Facebook Dating in the United States to prevent users under the age of 18 from accessing experiences meant to be enjoyed as adults.
Meta Platforms Investing in AI to Increase Top Line
Meta Platforms is investing heavily in developing AI, supporting the build-up of the metaverse. AI will also help Meta drive revenue growth in its ad business.
META, which currently carries a Zacks Rank #3 (Hold), is banking on its revenue growth in the coming quarters on solid return on investments from its investment in AI and ML and strategic partnerships. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
However, building the metaverse is a collective effort, and as such, Meta is making strategic partnerships with PyTorch co-founder
Microsoft
MSFT
and NVIDIA to develop and architect the required AI models for the metaverse.
Microsoft is bringing new work and productivity tools to Meta Quest Pro and Meta Quest 2 next year. These include apps like Microsoft Windows 365 and Microsoft Teams and the ability to join a Teams meeting from inside Meta Horizons Workrooms, which will help create a seamless working experience in the metaverse.
Meta Platforms has collaborated with NVIDIA to build an AI research supercomputer, helping META AI researchers to build different AI models crucial for creating the metaverse.
Meta’s recent investments to launch features to protect user data will likely boost user confidence amid stiffening competition.
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