By Yuvraj Malik and Eva Mathews
(Reuters) – Facebook-owner Meta Platforms Inc is expected to report its slowest quarterly ad revenue growth in a decade on Thursday, as businesses pull back on ad spending against the backdrop of soaring inflation worldwide and the war in Ukraine.
Global advertising and marketing budgets will be strained further if the Ukraine crisis drags on in the coming months, with some analysts predicting that Meta will also issue a tepid forecast for the current quarter.
Meta’s ad revenue is expected to have grown 8.7% in the first quarter, according to Refinitiv data, the slowest since 2012, when the company went public.
Wall Street analysts also said Facebook could be losing its grip on the global ad market even as digital advertising surpasses traditional methods.
“The predictions by Meta for a slowdown could be read as a reduction in the Facebook’s brand potency as well,” Hargreaves Lansdown analyst Sophie Lund-Yates said.
Meta has lost nearly half its market value since Feb. 2, when it reported a decline in Facebook’s daily active users for the first time and forecast a gloomy quarter.
Graphic: Meta’s ad sales growth since it went public in 2012 – https://graphics.reuters.com/META-ADVERTISEMENTS/dwpkrykrnvm/chart.png
THE CONTEXT
Google-parent Alphabet provided a cue on Tuesday, when it cited the war in Ukraine for slowing YouTube ad sales. Smaller rival Snap Inc warned that inflation, labor shortages and other economic challenges could pressure ad revenue.
The timing could not have been worse for tech firms reliant on ad revenues as they are also grappling with policy changes in Apple’s App Store and growing competition for ad dollars from companies like TikTok.
“The cost to acquire customers on digital channels like Facebook has increased while the ability to target customers has decreased,” said Mitchell Olsen, assistant professor of marketing at the University of Notre Dame.
As a result, many brand managers are reducing their exposure to Facebook and reallocating their ad dollars across various platforms, Olsen added.
Graphic: Ad sales at tech giants Meta Platforms and Alphabet – https://graphics.reuters.com/TECH-ADVERTISING/klpyklnzxpg/chart.png
THE FUNDAMENTALS** Co to report a 7.8% rise in Q1 revenue to $28.20 billion, its slowest growth since 2012
** Earnings per share is estimated at $2.56
** Advertising revenue is expected to grow 8.7% to $27.66 billion
Graphic: Meta’s quarterly revenue for the last decade – https://graphics.reuters.com/META-RESULTS/zgpomlabkpd/chart.png
WALL STREET SENTIMENT
** 45 out of 63 analysts rate the stock “buy” or higher, while 16 have a “hold” rating and two rate it as a “sell” or lower
** The median price target is $325, down by $25 in the last three months
** FB trading at $173.94 currently
QUARTER ENDING REFINITIV ACTUAL BEAT, MET,
IBES ESTIMATE MISSED
Dec. 31 2021 3.84 3.67 Missed
Sep. 30 2021 3.19 3.22 Beat
Jun. 30 2021 3.03 3.61 Beat
Mar. 31 2021 2.37 3.30 Beat
Dec. 31 2020 3.22 3.88 Beat
Sep. 30 2020 1.91 2.40 Beat
Jun. 30 2020 1.39 1.80 Beat
Mar. 31 2020 1.75 1.71 Missed
(Reporting by Yuvraj Malik and Eva Mathews in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)
