Key points
- The Meta Platforms (NASDAQ: FB) share price has fallen off a cliff after missing earnings expecations
- Rising inflation costs were cited as a headwind for the company
- Investors of ASX media shares could be on heightened alert this earnings season
Investors will be keeping a close eye on ASX-listed media shares today following the release of Meta Plantforms Inc (NASDAQ: FB) fourth-quarter results this morning.
The US-based tech company responsible for Facebook, Instagram, and Whatsapp missed revenue and earnings projections.
In response, the company's shares have been dismantled more than 21% in after-hours trading. At the time of writing, shares in Meta are now hovering around US$252, down from US$327 at the open.
Headwinds highlighted by Meta in its results could draw attention to ASX media shares today.
Rising inflation puts a dent in advertising budgets
Meta's fourth-quarter results could be the canary in the coal mine for investors of media companies reliant on advertising revenue. Despite a 20% year-on-year increase in revenue for the quarter, diluted earnings per share (EPS) fell 5%.
Furthermore, shareholders were also alerted to a potentially slower period of growth in the next quarter. In explaining this, Meta pointed to several headwinds that the company will be facing. These include:
- Increased competition for people's time
- A shift of engagement towards video experiences i.e Reels, which monetise at a lower rate; and
- Cost inflation is inhibiting advertising spend
Honing in on the inflation headwind, Meta chief financial officer David Wehner said:
[…] we're hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets.
This follows the United States headline inflation rate recently hitting 7%, marking a 39-year high for the country. However, Federal Reserve chair Jerome Powell has suggested a rate hike in the near future to quell the rising cost pressures.
What could it mean for ASX media shares?
While Meta Platforms is a slightly different beast compared to the ASX-listed shares which derive revenue from advertising, rising inflation is a far-reaching concern.
Importantly, Australia's headline inflation figure is half of the United States — sitting at 3.5%. Although, there is potential that advertisers will be cautious of forking out as much for advertising in the current economic environment.
For this reason, investors of ASX media shares such as Nine Entertainment Co Holdings Ltd (ASX: NEC), News Corp (ASX: NWS), and Ooh!Media Ltd (ASX: OML) — all of which are in the red in early trading today — will likely be paying extra attention this earnings season. Especially any commentary around how inflation costs might be delaying advertising spending.
