Facebook owner Meta Platforms plummeted Thursday after it reported third-quarter results that fell far short of earnings estimates and offered a revenue outlook that missed the mark. Several analysts lowered their price target on Meta stock.
The company reported adjusted earnings of $1.64 per share on revenue of $27.7 billion. Analysts expected Meta to report earnings of $1.90 per share on revenue of $27.4 billion, according to FactSet.
Meta stock crumbled 24.6% to close at 97.94 on the stock market today. Including Thursday's fall, shares are down roughly 70% since the start of 2022.
After years of unprecedented revenue and profit growth, Meta's ad business is beginning to slow, thanks to increased competition from TikTok and Apple and overall economic uncertainty. On Tuesday, Google-owner Alphabet reported a substantial miss on YouTube ad revenue.
In addition, Snap last week reported its weakest-ever quarterly sales growth, and warned investors that it was operating on an assumption of no revenue growth this quarter vs. the year-ago period.
"In our view, this digital ad downturn is much bigger than Meta," Monness Crespi Hardt analyst Brian White wrote in a note to clients. "It portends ominous days ahead for the broader global economy."
Further, White lowered his price target on Meta stock to 150, from 230.
Meta Stock: Darkest Days Ahead?
"Regulatory scrutiny persists, internal headwinds remain, and we believe the darkest days of this downturn are ahead of us," White said.
Meta is making a major business shift, creating what it calls the metaverse. It's a futuristic version of an immersive virtual world, facilitated by the use of virtual-reality and augmented-reality headsets. In the metaverse, people live, work, shop and interact with others.
Meta said it invested $4 billion developing the metaverse in the third quarter and expects to invest a total of $20 billion on it this year.
"Metaverse investment levels are the most expensive gamble by any company we've ever covered," Needham analyst Laura Martin said in her note to clients.
"When we search META's Q3 2022 transcript, the words 'long-term' show up 13x, and always next to the metrics Wall Street cares most about," Martin said. She added: "Why own META stock today?"
Elsewhere, RBC Capital Markets analyst Brad Erikson lowered his price target on Meta stock to 150, from 190. Also, Jefferies analyst Brent Thill cut his price target to 155, from 200.
Meta Stock: User Count Meets Estimates
The company expects fourth-quarter revenue to be in the range of $30 billion to $32.5 billion. The midpoint of $31.25 billion compares with analyst estimates of $32.3 billion.
Facebook reported having 1.98 billion daily active users, meeting estimates and up 3% from the year-ago period. It had 2.96 billion monthly active users, also meeting estimates and up 2%.
Meanwhile, Meta expects 2022 total expenses to be in the range of $85 billion to $87 billion.
"We are making significant changes across the board to operate more efficiently," Meta said in its earnings release.
"We are holding some teams flat in terms of head count, shrinking others and investing head count growth only in our highest priorities," Meta went on to say.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
