Key Takeaways

  • Analysts estimate adjusted EPS of $3.30 vs. $4.32 in Q2 FY 2021.
  • Monthly active people (MAP) is expected to rise YOY, but at the slowest pace in at least three and a half years.
  • Revenue is expected to decline for the first time in at least three years.

Meta Platforms Inc. (META), known as Facebook for its popular social networking site and brand, has faced a rapid deceleration in growth in its core social networking business in recent quarters. Coupled with intense regulatory scrutiny, this has prompted Facebook to adopt new strategies designed aimed at boosting engagement. The company recently announced plans to let users create up to five profiles for each Facebook account in an effort to boost sharing and posting. And Meta also is launching new monetizing features on Facebook and Instagram that will enable creators to make direct revenue and display non-fungible tokens (NFTs).

Investors will look closely at how these trends are affecting Meta’s performance when the company reports earnings on July 27, 2022 for Q2 FY 2022. Analysts predict the company will post a sharp decline in adjusted earnings per share (EPS), and the first decline in revenue year-over-year (YOY) in at least three years.

Investors will also be focusing on a key Meta metric: monthly active people (MAP), which measures the size of the company’s user base across its entire family of products. Although the company has recently shifted its focus to the metaverse, it is primarily a social networking company that operates multiple platforms. Meta’s social media platforms and brands include Facebook, Instagram, Messenger, and WhatsApp. For Q2 FY 2022, analysts expect MAP to grow at the slowest pace in at least three and a half years.

Meta shares have significantly underperformed the market in the last year. After skirting the S&P 500 between July and September 2021, the stock dropped slightly and traded sideways through February 2022. Following Meta’s Q4 FY 2021 earnings release that month, shares plunged and have yet to recover. Meta’s stock has traded up and down mostly with the broader market in the last several months, but has been unable to stage a recovery. As of July 24, Meta shares have provided a 1-year trailing total return of -51.8%, well behind the S&P 500’s return of -9.3%.


Source: TradingView.

Facebook (Meta) Earnings History

Meta posted strong adjusted EPS growth during the pandemic in 2020 and 2021 as people sheltered at home and sharply boosted their use of social media. In FY 2020, adjusted EPS growth accelerated from 13.2% YOY in Q2 to 46.0% for Q4. In FY 2021, adjusted EPS nearly doubled in Q2 compared to the same quarter a year earlier. But growth has sharply decelerated since then. Adjusted EPS growth slowed to 33.0% in Q3 FY 2021 and to 3.5% in Q4. In Q1 FY 2022, the company posted its first quarterly adjusted EPS decline, falling 11.2%, since the third quarter of FY 2029. In Q2, analysts expect adjusted EPS to drop 23.6% YOY.

Meta has posted robust revenue growth in recent years. Revenue rose 26.6% in FY 2019, 21.6% in FY 2020 and accelerated to 37.2% in FY 2021. In the last three quarters, revenue growth has slowed significantly, rising by only 6.6% YOY in Q1 FY 2022. Now analysts expect revenue to decline in Q2, which would be the first decline in at least three and a half years.

Facebook (Meta) Key Stats
  Estimate for Q2 FY 2022 Q2 FY 2021 Q2 FY 2020
Adjusted Earnings Per Share ($) 3.30 4.32 2.21
Revenue ($B) 29.1 29.1 18.7
Monthly Active People (B) 3.7 3.5 3.1

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focused on Meta’s monthly active people, or MAP, a key metric that measures the size of the company’s global active user base across all of its platforms. Meta defines a MAP as a registered and logged-in user of Facebook, Instagram, Messenger, and/or WhatsApp who has visited at least one of these products through a mobile device app, web, or mobile browser in the prior 30 days. This is distinct from the company’s monthly active user (MAU) metric, which is specific to Facebook and/or Messenger. Meta derives the majority of its revenue through selling advertising space on its social media sites and apps to marketers. The bigger its user base, the more attractive its platform is to advertisers. Historically, a bigger user base also has made it easier for Meta to attract new users as people want to be on its platforms because their friends are on it, a classic example of the network effect.

Meta’s MAP growth accelerated early in the COVID-19 pandemic as more users around the world boosted their use of social media and streaming entertainment. Meta’s MAP growth accelerated from 10.4% in Q2 FY 2019 to 13.8% in Q2 FY 2020, reaching a peak of 15.4% in Q1 FY 2021. Since then, the pace has steadily slowed. It decelerated from rose 8.8% in Q4 FY 2021 to 5.5% in Q1 FY 2022. Analysts now predict that Meta will see MAP increase by just 4.6% YOY for Q2 FY 2022, the slowest pace of growth in at least three and a half years. By Q2, MAP is expected to total 3.7 billion users, nearly half of the world’s population.

By AKDSEO