U.S. technology stocks tremble, meta-universe leader fell badly this week

These two days, the U.S. stock volatility is unusually intense, especially the shares of technology giants, showing a sharp rise and fall. February 3, high-tech companies dominated by the Nasdaq 100 index plunged 4%, the largest decline since September 2020. Individual stocks fell heavily, with Meta Platforms (formerly known as Facebook), the meta-universe leader, plunging 26.39% and evaporating nearly $2,400 (about RMB 1.5 trillion) in market value, setting a record for the largest one-day market value drop in U.S. stock history.

Meta-universe leader meta stock price unexpectedly collapsed

Meta Platforms, formerly known as Facebook, had previously made a high-profile announcement of a full transformation of the meta-universe, contributing to the global meta-universe craze. However, the company's latest earnings report unexpectedly thundered, blowing its own share price apart.

On February 3, Meta's share price plunged 26.39%, and its market value evaporated nearly USD 240 billion, or about RMB 1.5 trillion, setting a record for the largest single-day market value drop in the history of U.S. stocks. The single-day market capitalization loss of RMB 1.5 trillion is equivalent to the evaporation of one-third of Tesla, one Disney or ICBC, and five Baidu. Some analysts pointed out that the heavy drop in Meta's share price may affect the trend of the A-share meta-universe related concept stocks. 2.4 opened, Meta's share price continued its decline and narrowed to 0.28% by the end of the day.

The 2021 Q4 earnings report was far below market expectations, which was one of the triggers for Meta's share price collapse. The report was also Meta's first since the launch of its "meta-universe" strategy. To make matters worse, the company's revenue guidance for the first quarter of this year was a big surprise to the market: revenue was expected to grow 3% year-over-year, compared to 48% revenue growth in the same period of the previous year.

The report showed that Meta achieved revenue of $33.67 billion in the fourth quarter, an increase of 20% year-on-year, although the increase was significantly slower than the first three quarters of last year, after 47.6%, 55.6% and about 35% respectively; Meta's fourth quarter net profit was $10.285 billion, lower than the expected $10.9 billion and down 8% year-on-year.

The main point at issue is that Meta expects first-quarter revenue to be between $27 billion and $29 billion, up 3% to 11% year-over-year. Even at the top of the range, that's well below Wall Street's general estimate of $30.1 billion.

The company said that at higher levels, "headwinds" in ad volume and pricing would have an impact on results.

The issue of ad placement volume was the most alarming, simply put, people seem to be willing to spend less time on Meta platforms, including Facebook, WhatsApp, Instagram and Messenger.

Company executives said on the earnings call that we expect to continue to face headwinds from two sources in terms of ad volume: increasing competition for user time; and a shift in user stickiness toward the short-form video side of things like Reels, which is less monetizable than more established core products like Feed and Stories.

Meta's entry into the short-form video space in response to TikTok, which is owned by ByteHop, has hurt performance to some extent.

There is also the key issue of a possible shift in user behavior preferences, with people seeming to spend more time on other things than Facebook and Instagram pages. This may reflect a willingness to spend more time outside after the implementation of two years of strict epidemic measures.

In addition, it may also indicate that people are just a little bit tired of social media, so they are using social platforms less and less.

In terms of ad pricing, Meta is facing a three-pronged impact, one of which is that Apple has introduced stricter privacy standards that allow advertisers to track consumer behavior on apps and websites on iOS devices. A year ago, these changes were not in effect, which means their impact will still be reflected in growth in the first quarter. The company said we expect the ability to price ads to continue to be negatively impacted by resistance to platform and regulatory changes.

Second, Meta noted that the first quarter will contrast with the "strong demand" of the prior year quarter, as macroeconomic challenges such as high inflation and supply chain bottlenecks are impacting advertisers' budgets.

Finally, the company expects foreign currency exchange rates to be a headwind to year-over-year revenue growth in the quarter.

Meta's earnings report came as a bit of a surprise and made it even harder to make sense of, just a day before Meta's results were released, Google parent Alphabet reported results that beat expectations across the board and reported a new high net profit, sending the company's stock sharply higher.

Alphabet CEO Sundar Pichai said in a statement that the company's advertising business "continues to grow strongly," helping "millions of businesses thrive and find new customers.

The contrast between the two is stark, with Meta complaining that Reels' revenue is low, but Alphabet arguing that YouTube's revenue is growing rapidly.

This leads to the final two questions, are consumers using less social media in general, or just less of Meta's platform? Are advertisers cutting back, or are they shifting money away from platforms like Facebook?

Concerned about the performance of the Meta Universe strategy division, this earnings report Meta disclosed for the first time the financial data of the FRL division containing the Meta Universe strategy, the company expects the investment in the Meta Universe to reduce operating profit by about $10 billion in 2021, and FRL will not be profitable in the short term. In CEO Zuckerberg's vision description of the meta-universe last July, he hopes to spend about five years to build Facebook into a meta-universe company, and billions of dollars of multi-year investments will eat into profits.

FRL reported revenue of $877 million in the fourth quarter of last year, up 57 percent sequentially and 22 percent year-over-year, according to the earnings report. At the same time, the division reported an operating loss of $3.3 billion in the fourth quarter last year, with net losses gradually widening in each quarter throughout the year, with a net loss of $10.19 billion for the full year 2021, $6.62 billion in 2020 and $4.5 billion in 2019.

Amazon power to save the day

Meta's bloodbath hit the popularity of other tech stocks on Thursday day, with e-commerce giant Amazon plunging 7.8% and evaporating nearly $120 billion in market value. However, after the bell on Thursday, Amazon disclosed its earnings report, bringing some warmth back to the tech stocks in the cold winter.

Amazon's fourth-quarter 2021 earnings report showed that the company reported net sales of $137.4 billion in the fourth quarter, up 9.4% year-on-year, compared with analysts' expectations of $137.8 billion; fourth-quarter operating profit of $3.5 billion, up 98% year-on-year, above analysts' expectations of $2.43 billion; and net profit of $14.3 billion, up 98% from a year ago. Among them, the company's investment in electric car maker RivianR earned $11.8 billion before taxes: $27.75 in earnings per share, well above analysts' previous estimate of $3.77.

In the fourth quarter, Amazon's cloud computing business, AWS, grew faster than analysts expected, with revenue from the business rising nearly 40 percent year-over-year to $17.78 billion, compared with market expectations of $17.37 billion and $16.11 billion in the prior-year quarter. The division reported operating profit of $5.29 billion in the fourth quarter, up nearly 49 percent and well above analysts' expectations of $4.84 billion. Meanwhile, Amazon's advertising business also saw significant growth as new advertising opportunities emerged across a range of Amazon businesses.

For the full year 2021, Amazon reported annual earnings of $33.364 billion, up 56.41% year-over-year, and total operating income of $469.822 billion, up 22% year-over-year.

In addition, Amazon announced an increase in the price of Prime membership for the first time in nearly four years. The company said it will raise the annual Prime membership fee from $119 to $139 and the monthly fee from $12.99 to $14.99. The price adjustment will take effect from Feb. 18 for new members and from March 25 for existing members.

Market analysis shows that although sales and earnings guidance were both slightly lower than market expectations, Amazon's earnings performance this quarter and price increase measures gave investors enough confidence to let the market believe that future growth will resume; the company's 9% net income growth also shows that its four quarters with its good management to overcome the "very challenging operating environment," multiple reasons for Amazon after the bell rose more than 20%, driving the Nasdaq 100 after the bell rose 2% at one point.

Snap's share price soars as it makes its first profit

Snap, the "read-and-burn" social platform, also disclosed a beautiful earnings report, as the company reaped its first-ever quarterly net profit.

After the bell on Feb. 3, Snap reported its fourth-quarter and full-year 2021 results. The company reported fourth-quarter revenue of $1.3 billion, compared with market expectations of $1.2 billion and $911 million for the same period a year earlier. compared with a loss of $0.08 in the same period last year.

For the full fiscal year 2021, Snap reported revenue of $4.117 billion, up 64 percent year-over-year; a net loss of $488 million, a 48 percent narrower loss year-over-year; and a diluted loss per share attributable to common shareholders of 31 cents, a 52 percent narrower loss compared to a diluted loss of 65 cents per share in fiscal 2020.

Compared to Meta's poor key user metrics of 1.93 billion daily active users, unchanged from the previous quarter, Snap had 319 million daily active users in the fourth quarter, an increase of 54 million or 20 percent year-over-year compared to the same period last year. In each of the past five quarters, Snap has achieved year-over-year growth of 20 percent or more in the number of daily active users. Snap achieved year-over-year and year-over-year growth in the number of daily active users in North America, Europe and the rest of the world in the fourth quarter.

Snap's ARPU also reached $4.06, up 18 percent year-over-year, with the fastest growth in North America and Europe, both up 30 percent or more year-over-year, but only 1 percent year-over-year growth in other regions.

Snap's share price rose more than 60 percent after the release of the above-mentioned results, and on Feb. 4, when the U.S. stock market opened, Snap jumped 44 percent. By the close of trading, Snap was up 58.82%.

Like Meta, Snap also faced the impact of Apple's privacy policy adjustments, but earnings showed the company made significant progress in the fourth quarter on Apple's platform policy changes. a prepared statement by Snap CFO Derek Anderson for the conference call showed that Snap's advertising business, which was directly affected by the iOS changes, recovered faster than it expected.

Last April, Apple adjusted its privacy policy and implemented ATT (App Tracking Transparency), a feature that requires apps to obtain and process Apple user data with the user's consent. All apps on the App Store must comply with this new policy. However, in December Apple "quietly" relaxed its controversial iPhone privacy policy, allowing many platforms, including Snap and Facebook, to share user information from iPhones, but only if the data is anonymized and aggregated and not associated with specific user profiles.

Snap previously said it was planning to share data from its 306 million users, including those who asked Snap not to track it, so that advertisers could track how ads are placed in a more complete, real-time manner.

However, Snap said advertisers still face a number of "headwinds" in the fourth quarter, as adjustments to the way it targets users accurately will hit its 2022 revenue by an estimated $10 billion.

It will take at least a few more quarters for our advertising partners to build full confidence in our new solution.

Chief commercial officer Jeremi Gorman, meanwhile, said the sales team is helping advertisers with the transition.Advertisers who tend to focus on "low-funnel targets" such as in-app purchases have been the most affected, and some have migrated to "mid-funnel targets" such as installs or clicks, which have greater visibility despite the iOS policy changes.

In addition to the headwinds of Apple's privacy policies, Anderson said macroeconomic forces such as supply chain disruptions and labor shortages are also affecting advertisers, particularly Snap's brand advertising division.

Some media analysis said that the quarter's giant earnings reports have largely come to an end, and the strong results of Amazon, Snap and other companies in the earnings closing stage have helped to ease market concerns caused by the plunge in Meta shares, boosting the popularity of technology stocks to some extent.