Published on 28 Jul 2022 on Zacks via Yahoo Finance
ETFs in Focus After Meta's First-Ever Revenue Drop
After the closing bell on Jul 27, Facebook’s parent company Meta Platforms META reported dismal second-quarter 2022 results, wherein it missed earnings estimates. The social media giant reported its first-ever quarterly drop in revenues and provided a gloomy forecast given the broader fallout in digital advertisement.As such, FB shares dropped as much as 4.6% in aftermarket hours on elevated volume. This has put focus on ETFs — Communication Services Select Sector SPDR Fund XLC, Fidelity MSCI Communication Services Index ETF FCOM, Vanguard Communication Services ETF VOX, iShares Global Comm Services ETF IXP and UPHOLDINGS Compound Kings ETF KNGS — with a substantial allocation to this social media giant.
Earnings in Focus
Adjusted earnings per share came in at $2.46, missing the Zacks Consensus Estimate of $2.50 but declining 32% from the year-ago earnings. Revenues dipped 1% year over year to $28.82 billion and came ahead of the estimated $28.7 billion. This marks Meta’s first year-over-year revenue decline since going public in 2012. Recession fears and competitive pressures weighed on its digital ads sales (read: ETFs in Focus Ahead of Big Tech Q2 Earnings).Meta Platforms’ global daily active users increased 4% year over year to 2.88 billion. Monthly active users grew 4% year over year each to 3.65 billion. The company stated that about 2.93 billion people use at least one of the Family of services (Facebook, WhatsApp, Instagram or Messenger) every day, on average.The world’s largest social media platform issued a weak revenue guidance for the third quarter. It expects revenues in the range of $26-$28.5 billion, flat to down compared with $28.3 billion in the third quarter of 2021 that will mark a second year-over-year drop in a row. Along with the decline in ad sales, Meta is facing pressure from the strong dollar and rising competition from the rival TikTok. It expects a 6% revenue growth headwind in the third quarter, based on the current exchange rates. Additionally, Meta forecasts third-quarter Reality Labs revenues to be lower than the second quarter.