Reports Q4 2021 results on Wednesday, February 2, after market close
Income forecast: $33.34 billion
EPS forecast: $3.85
When Meta Platforms (NASDAQ:) reports its latest earnings today, investors will likely focus on the implications of Apple's (NASDAQ:) review of its privacy settings for the social media giant. Meta of Menlo Park, California is the parent company of Facebook, Instagram and WhatsApp, among other popular social media platforms.
Meta took a cautious note in its last call in October, saying revenue growth could stall as Apple's new rules hamper data collection on mobile devices at a time when the pandemic-driven boom in its ad industry slows down.
Since then, FB shares have traded sideways, rising just 1.7% over the quarter. However, the market sell-off in 2022 also weighed on the company's share price, causing a loss of -6.4% in January. It closed at $319 on Tuesday.
Apple's privacy changes to the iOS operating system have made it challenging for social media companies to target ads. The changes, first announced in April 2021, will require apps to ask users if they allow tracking.
As a result, companies now have less data available to target ads to the right audiences and receive information about how well those ads were performing.
In October, Snap (NYSE:) blamed Apple policies for an expected slowdown in the fourth quarter, which has caused the share price to fall more than 50% since then.
In addition to headwinds related to Apple's privacy settings, Meta and other social media companies are also seeing their growth hurt by global supply chain disruptions that make it difficult for small and medium-sized businesses to fulfill their orders.
Long-term upside potential
Despite these sources of turbulence, investors continue to see long-term value in holding Meta shares, especially when its family of apps keeps adding more users. In a poll of 55 analysts Investing.com46 rate Meta as "Outperform" with a 12-month consensus price target of $395.37, indicating upside potential of 23. 9% implies.
Source: Investing.com
Over the past two years, as people flocked to social media apps during the pandemic to keep up with loved ones and enjoy digital entertainment, Facebook has capitalized on this.
As the pandemic-related boom in ad spending slows, the company's CEO, Mark Zuckerberg, is shifting a significant portion of his resources to build out the metaverse — a term used to describe a immersive digital environment where people spend time together in virtual worlds.
In a recent note, Goldman Sachs analyst Eric Sheridan said he sees Meta as a long-term secular winner on the metaverse and well positioned to take advantage of the next wave of computing. His note adds:
"In recent quarters, Meta Platforms has outlined its long-term vision to position the company for Web 3.0 and the metaverse as the successor to the mobile Internet, including a change of company name and a commitment to scale investments against this opportunity. ."
Also, if history gives any clue, Meta stocks have rebounded strongly after every major crisis the company has faced in recent years, including intense regulatory and media scrutiny of the vulnerability of the platform to abuse and invasion of user privacy.
The reason for this is simple: companies cannot ignore the FB platform because of the company's huge global reach. By the end of the third quarter, the number of daily active users for the company's family of apps had risen to 2.81 billion. Meta Platform revenues may come under pressure, primarily due to Apple's new privacy settings and declining digital advertising spend. But any weakness would represent an opportunity for buy-and-hold investors looking to add stocks during the dips.
