What happened

Metaplatforms (NASDAQ:FB) Shares are hammered this week after the company’s disastrous fourth-quarter earnings report. The company’s stock price is down about 21.2% from last Friday’s market close, according to data from S&P Global Market Intelligence.

The social media giant released its quarterly results after the market closed on Wednesday, and performance was worse than expected in almost every area. It generated earnings per share of $3.67 on revenue of $33.67 billion, while the average analyst estimate was for earnings per share of $3.84 on sales of $33.4 billion. dollars. Although it posted a slight overshoot in revenue and topped analysts’ consensus estimate for average revenue per user, the rest of the report was filled with bad news.

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So what

Meta Platforms user engagement numbers fell short of market expectations in the fourth quarter. The company recorded 1.93 billion daily active users (DAU) and 2.91 billion monthly active users (MAU). Meanwhile, consensus analyst forecasts were 1.95 billion DAU and 2.95 billion MAU.

Average revenue per user of $11.57 during the period beat market expectations of $11.38, but the number of daily active users declined for the first time in company history, and Meta’s disappointing results shocked the market. Management attributed the relatively weak performance to macroeconomic headwinds and user privacy changes on Applemobile operating system.

Now what

Meta Platforms is making huge investments to give itself what it intends to be a leadership position in the metaverse, and it looks like this push will create a significant drag on earnings in the near term. To make matters worse, near-term sales growth also looks poised to underperform recent market expectations. Management expects sales of between $27 billion and $29 billion for the first quarter, while the average estimate from analysts polled by Refinitiv was expecting revenue of $30.15 billion. Meta-management forecasts sales growth of around 7% year-over-year in the first quarter, which would be a dramatic deceleration from sales growth of 48% year-over-year that the company recorded in the first quarter of 2021.

For long-term investors, this liquidation could present an opportunity to build a position in an industry leader at a discount. However, with the tech giant’s weak fourth-quarter report just behind it and widespread doubts about the quality of its growth engine looming, Meta Platforms’ stock could remain volatile in the near term.

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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Keith Noonan has no position in the stocks mentioned. The Motley Fool owns and recommends Apple and Meta Platforms, Inc. The Motley Fool recommends the following options: March 2023 Long Calls at $120 on Apple and March 2023 Short Calls at $130 on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.