Why Facebook’s Meta stock is soaring 18% in after-hours trading

Faceb..Meta Platforms has just reported its latest earnings…

| More on:
a group of five people lie on the floor with their heads touching, each wearing hi tech goggles over their eyes as if in a metaverse workplace collaboration.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • It's been a dramatic week for US tech shares 
  • Social media giant Meta, formerly known as Facebook, has just dropped its quarterly earnings 
  • Let's dig into the mixed bag (and share price movements) of this earnings report 

2022 has been a bit of a ‘back to the future’ year for the Meta Platforms Inc (NASDAQ: FB) stock price. Meta, the US company formerly known as Facebook, has seen its share price almost halved over 2022 so far. This morning (our time), the company closed at US$174.95 a share after hitting a new 52-week low of US$169 in last night’s trading. That is the lowest share price Meta has had in front of it since the COVID crash of 2020.

But the company’s after-hours pricing tells a markedly different tale. During after-market trading, Meta shares ended up closing substantially higher at US$207.09 a share. That’s a good 18.37% above its closing price.

So what could have caused such a dramatic re-evaluation of Meta stock from the market?

Well, the company’s earnings report, of course. Meta reported its results for the three months to 31 March 2022 after normal US market trading closed this morning.

Meta stock price jumps on earnings report

In these results, Meta reported an increase in daily active users to 1.96 billion, an increase of 31 million over the quarter and 4% year-over-year. Monthly active users also rose, by 3% to 2.94 billion. In terms of revenue, the company announced revenues of US$27.9 billion, a year-over-year rise of 6.6%. 

But Meta also revealed a rise in total costs and expenses of 31% to US$19.38 billion. This was driven in part by an increase in staff headcount to 77,805, up 29% year-over-year.

Diluted earnings per share (EPS) fell over the quarter. Meta reported EPS of US$2.72 per share, down 18% from US$3.30.

Meta chief financial officer Sheryl Sandberg added the following:

We expect second quarter 2022 total revenue to be in the range of $28-30 billion. This outlook reflects a continuation of the trends impacting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine…

We expect 2022 total expenses to be in the range of $87-92 billion, lowered from our prior outlook of $90-95 billion. We expect 2022 expense growth to be driven primarily by the Family of Apps segment, followed by Reality Labs.

Why did the markets have this reaction?

So it’s clear that investors found a lot to be excited about in this earnings report, judging by the enthusiastic after-hours share price reaction. Here’s some of what eToro analyst Josh Gilbert had to say on Meta’s earnings and the market’s reaction:

It was a mixed quarter for Meta, as the social media giant missed revenue expectations, but saw a return in daily user growth after declining in the previous quarter. It was a better than feared result for Meta’s investors. 

Meta’s daily active users jumped to 1.96 billion, up 31 million from the last quarter and beating expectations of 1.94 billion. This metric has helped ease concerns, at least for now, that Facebook was losing steam and that the platform had ‘peaked’. 

The company’s advertising revenue experienced the slowest growth year-on-year for over a decade at just 6 per cent. This was, in part, thanks to Apple’s iOS changes that have restricted Meta’s ability to offer targeted ads. This is going to be a lingering issue for Meta, as it could potentially cost the company upwards of USD$10 billion in 2022…

At the current Meta stock price, this US tech giant has a market capitalisation of US$474.91 billion. 

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Sebastian Bowen has positions in Meta Platforms, Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Inc. The Motley Fool Australia has recommended Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

Woman using Pintereset on an iPad.
International Stock News

Pinterest is down 78% — Is it time to buy?

A sudden leadership change has made this question all the more relevant.

Read more »

Man looking amazed holding $50 Australian notes, representing ASX dividends.
International Stock News

3 passive income secrets for dividend investors

You'll make a lot more money if you know how to find and keep dividend payers in your portfolio.

Read more »

woman preparing Moderna vaccine
International Stock News

3 things about Moderna that smart investors know

There's more to Moderna than its COVID-19 vaccines, which investors may not appreciate fully.

Read more »

catapult share price
International Stock News

Which under-the-radar cryptos could pop after this year’s big soccer tournament in Qatar?

Based on what we saw after football's Big Game in February, the upcoming Big Soccer Tournament in Qatar could be…

Read more »

Happy family watching Netflix together.
International Stock News

3 reasons Netflix should bounce back in July

Shares of the streaming video giant have plunged by 70% in 2022 so far. But everybody loves a good comeback…

Read more »

A woman in colourful outfit holds up a phone to take a selfie.
International Stock News

3 reasons why Apple stock is a buy

The famed tech company has what it takes to bounce back from 2022's market downturn. Here's why.

Read more »

a water tap is turned on and showering out banknotes into the open hand of a woman below it.
International Stock News

Companies with high free cash flow margins and high free cash flow yields massively outperform the market over time

What matters for long-term investing success.

Read more »

Woman on her laptop thinking to herself.
International Stock News

Is it time to load up on beaten-down growth stocks (like Tesla)?

Here's a look at some issues facing both the markets and one electric-vehicle maker in 2022.

Read more »