- Analysts estimate EPS of $2.54 vs. $3.30 in Q1 FY 2021.
- Monthly active people (MAP) are expected to rise YOY, but at the slowest pace in at least three years.
- Revenue is expected to increase, but also at the slowest pace in at least three years.
Meta Platforms Inc. (FB), commonly also known as Facebook, has enjoyed robust earnings and revenue growth during the past two years amid the COVID-19 pandemic. But now, the company is facing dual crises. Growth is slowing sharply in its core social networking businesses, including Facebook. And the company’s new strategy of focusing growth on the metaverse is running into major challenges from regulators and some shareholders. The biggest one: a Meta shareholder recently won regulatory approval for a third-party evaluation of the potential psychological, human rights, and other harms of the metaverse to users. The evaluation will be one issue that Meta shareholders vote on at the company’s annual general meeting, and a negative vote could threaten the company’s new strategy.
Investors will be watching closely for how these forces will affect Meta’s growth when the company reports earnings on April 27, 2022 for Q1 FY 2022. Analysts expect the company to report a significant year-over-year (YOY) decline in earnings per share (EPS) and the slowest pace of revenue growth in at least three years.
Investors will also be focusing on a key Meta metric: monthly active people (MAP), which measures the size of the company’s user base across its entire family of products. Although the company has recently shifted its focus to the metaverse, it is primarily a social networking company that operates multiple platforms. Meta’s social media platforms and brands include Facebook, Instagram, Messenger, and WhatsApp. In Q1 FY 2022, analysts expect MAP to increase YOY, but at the slowest pace in at least three years.
Shares of Meta have significantly underperformed the broader market in the last year. Although Meta stock outperformed from late April through October 2021, it has lagged the S&P 500 since then. Meta’s shares traded mostly sideways from October through February but then plummeted following the company’s Q4 FY 2021 earnings report. In the last three months Meta stock recoups some of its losses and then fell back. As a result, Meta has a 1-year trailing total return of -38.3%, far below the S&P’s return of 2.6% over the same period.
Facebook (Meta) Earnings History
Meta’s quarterly EPS growth accelerated dramatically during the early stages of the COVID-19 pandemic. EPS more than doubled YOY in Q1 FY 2020 and nearly doubled YOY in the subsequent quarter. Quarterly EPS growth remained largely robust through Q2 FY 2021 before slowing significantly to 18.5% in Q3 FY 2021. However, the last quarter of the year marked a sharp reversal, with quarterly EPS declining by 5.3% YOY. This was the first YOY decline in 10 quarters. For Q1 FY 2022, analysts expect EPS to drop even further, by 22.8% YOY.
Meta’s revenue has been more steady, but it has still seen a recent slowdown in growth. Throughout FY 2019, quarterly revenue growth percentages ranged in the mid-to-high 20s YOY. Revenue growth accelerated to 47.6% and 55.6% in Q1 and Q2 FY 2021. But it has been steadily slowing since then, with growth of 35.1% in Q3 FY 2021 and 20.0% in Q4. For Q1 of this year, analysts estimate quarterly revenue growth of 8.3%, which would be the slowest pace of revenue growth in at least three years.
|Facebook (Meta) Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Earnings Per Share ($)||2.54||3.30||1.71|
|Monthly Active People (B)||3.7||3.5||3.0|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focused on Meta’s monthly active people, or MAP, a key metric that measures the size of the company’s global active user base across all of its platforms. Meta defines a MAP as a registered and logged-in user of Facebook, Instagram, Messenger, and/or WhatsApp who has visited at least one of these products through a mobile device app, web, or mobile browser in the prior 30 days. This is distinct from the company’s monthly active user (MAU) metric, which is specific to Facebook and/or Messenger. Meta derives the majority of its revenue through selling advertising space on its social media sites and apps to marketers. The bigger its user base, the more attractive its platform is to advertisers. Historically, a bigger user base also has made it easier for Meta to attract new users as people want to be on its platforms because their friends are on it, a classic example of the network effect.
Meta’s MAP has grown at a solid pace during at least the last 12 consecutive quarters. Through that period, YOY growth has ranged from 8.5% to 15.4%, the latter of which took place in Q1 FY 2021. Growth has decelerated since then, rising by 8.8% in Q4 FY 2021, the second-slowest rate of growth of the last three years. In Q1 FY 2022, analysts expect growth to slow even further to 5.9% to 3.7 billion monthly active people across Meta platforms. That number is nearly half the size of the world’s population.