Meta Earnings | The Daily Peel | 2/3/22

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Market Snapshot

It was a colorful day on Wall Street yesterday, full of deep reds and greens as traders attempted to weigh everything from earnings reports to JPow’s rate plans. The S&P returned 0.94% while the Dow gained 0.63% and the Nasdaq followed with a 0.5% gain.

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Let’s get into it.

Macro Monkey Says

Meta Earnings — If anyone is looking for Mark Zuckerberg today, good luck because after yesterday’s earnings report, he’s sure to have a long and busy day of crying in his basement.

Surprisingly, the numbers were even worse than the company’s name change a few months back. Not great for shareholders, but it’s what the rest of us have all been waiting for.

Nearly everything missed expectations. Revenue came in at $33.7bn vs $33.4bn expected, but earnings sat at only $3.67 while analysts were hoping for $3.84.

Daily active users missed by about 20mm, showing only (lol, only) 1.93bn users per day. Monthly active users came in below too at just (just) 2.91bn. Absolutely ridiculous, imagine having almost 2bn people use your products every single day and a bunch of suits on Wall Street telling you it’s still not enough.

It only got worse from there. Executives expect sales to come in at $27-$29bn rather than the $30.2bn traders wanted. This next part barely makes any sense, but anyway, Zuck somehow sat there with a straight face and told analysts that supply chain issues caused disruptions for the firm.

It’s like they’re addicted to bullsh*t, also claiming earnings were down on account of users shifting to products that “monetize at lower rates.” In other words, “we can’t monetize like we used to.”

While Zuck cries in his basement, Tim Appl- I mean, Cook, is laughing on his throne. Meta cited Apple’s privacy changes as a major hindrance for the quarter, along with macroeconomic pressures like inflation. Shares were annihilated after hours, losing 23%.

I guess Zuck & Co. really leaned into the firm’s core competency of causing depression yesterday, this time among investors instead of just teenagers that use their platforms.

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What's Ripe

Alphabet ($GOOG) — Alphabet must’ve hired Ringo Starr last quarter because they beat earnings like a drum.

Net income came in well above expectations, clocking EPS of $30.69 vs the $27.34 expected on record quarterly revenue of $75.3bn, a 32% annual jump.

Most exciting, however, was the announcement of a 20-for-1 stock split, which doesn’t actually have any material effect on the business, but it gets the apes on r/WSB all hyped. If done at yesterday’s close, GOOG would trade at $148.04. Shares popped 7.4% on the bevy of news.

Advanced Micro Devices ($AMD) — Unlike the company’s name, AMD’s earnings were far from micro.

Shares gained 5.1% after the firm reported a 26% jump in earnings and a massive 49% boost in revenue, coming in at $0.92/sh on $4.83bn in top line, both of which beat expectations handily.

Even more fun, however, was the 2022 guidance. Management expects $21.5bn in sales this year, around $2.25bn more than consensus estimates. In the words of Larry David, it was pretty, prettyyy, pretyyyy good.

What's Rotten

PayPal ($PYPL) — PayPal needs a pal, and to get paid.

Shares absolutely sh*t the bed yesterday, falling a ridiculous 24.6% on a garbage earnings call. The meltdown began with an earnings miss, coming in at $1.11/sh vs expectations of $1.12/sh, but it got so much worse.

Guidance for full-year earnings came in well under analyst projections with management seeing $4.60-$4.75/sh while analysts wanted $5.25.

It certainly doesn’t help that the pandemic is ending (hopefully) as a lot of business they picked up since 2020 is online-only. Good for us, not so much for PayPal.

Spotify ($SPOT) — For the past few months, shares in Spotify have been much like COVID in 2020, just absolutely all over the place.

Traders can’t figure out what to do with it, leading to the 5.8% fall the firm saw yesterday before reporting earnings after the bell. Revenue came in hot but was quickly overshadowed by slowing user growth.

“Near the top end of the guidance range” was the language the firm used for its 18% growth to 406mm users, which is just Latin for “we suck and missed on user guidance.” Making a bad day worse, share cratered over 21% after hours.

Thought Banana

FSDead — Once again, Tesla is recalling their cars. This time, the firm has to fix up over 54,000 cars and SUVs on issues with the often-hailed yet frequently-criticized Full-Self Driving (FSD) feature. Considering the company said FSD would be a primary focus this year, investors were less than pleased, sending shares down 2.8% yesterday.

It’s laughable. The so-called “Full”-Self Driving feature apparently doesn’t always stop at, you know, stop signs. Kind of like having an in-a-hurry 17-year old drive a car, FSD often causes vehicles to slow down, but not stop, at intersections, rolling through them at speeds of up to 5.6mph. Might not sound super fast, but it’s way faster than zero.

This recall brings Tesla’s all-time recalls to just below one million, roughly 40% of all cars the firm has ever produced. Not a great look. Imagine if literally any other company had to recall almost 40% of products ever produced — investors would demand the CEO’s head on a stick.

But Tesla and Elon have more fans than The Beatles, it seems. So regardless, I’m sure they’ll be just fine.

Wise Investor Says

“Luck is a much more predominant factor than we like to admit.” — Nassim Taleb

Happy Investing,

Patrick & The Daily Peel Team

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