About Those Facebook (Meta) Earnings

One would certainly be correct to assume the earnings report from Meta (FB) was just what the tech space needed to prove all the doubters wrong and that “Tech was back, baby!”

Sure, if one looks at its current explosion higher and that’s all they considered. However, unlike most of the financial/business media with their clown antics and reporting, just how “fantastic!” were those reporting numbers? Hint: (insert “wha, whaa, whaaa” sound effect here.)

As I type this Facebook’s stock (sorry, but the Meta™ thing is beyond ridiculous) is closing in on a rocket ship ride from its overnight reporting to now some 25% higher into the stratosphere. Who knows, maybe back to deep space territory is the next stop. Yet, by looking at the numbers – I highly doubt it unless the “markets” now on-again BFF Jerome Powell hits the brrrrrr button, again. But that’s for another time.

Everywhere you look the media is touting the term “beat.” Well, it is my insinuation the only thing that was truly getting beat is the poor dead bears horse known as “Shorty.” Yet that seems to be the entire extent of anything and everything concerning FB. Well, that and the visible sign of relief as another analyst states with certainty “Facebook is not Snapchat™!”

True, it is not. But what it is (my conjecture) is what I’ve been arguing for years: its AOL™. And this latest report is adding more substance to my argument, not taking away as some have tried to contend.

Let’s look at just two metrics within the report to keep things simple enough that even a Ivy League’s business professor can keep up, shall we? The following is via ZeroHedge™:

…details from the Q4 press release.

  • EPS $1.76, missing the estimate 2.22
  • Revenue $32.17 billion, -4.5% y/y, beating the estimate $31.65 billion
    • Advertising rev. $31.25 billion, -4.2% y/y, beating the estimate $30.86 billion
    • Family of Apps revenue $31.44 billion, -4.1% y/y, beating the estimate $30.81 billion
    • Reality Labs revenue $727 million, -17% y/y, beating the estimate $652.4 million
    • Other revenue $184 million, +19% y/y, missing the estimate $188.1 million

So here’s my first observation: EPS – missed. Total Revenue down, because: Advertising was down, App revenue: down. These two are its main drivers and both are what? Hint: Down 4.5% from a year ago. “So where’s the beef beat?” you’re asking, great question. Here’s the answer…

It “beat” by not being as bad as the analysts and/or management guided for. Or, said differently: Revenue may have been “kneecapped” but the headline “beat” turned the bots on the Bears and not the Bulls. So the bullsh#ting of the term “beat” can and will continue – until it can’t. Oh yeah, I almost forgot – that and an additional $40Billion in stock buy backs.

Folks: You just can’t make this stuff up.

Another point…

Maybe it’s just me, but I ask: FB’s raison d’être business model is ads for eyeballs, correct?

If FB added more eyeballs then ever before – then why did its ad business tank (~5%) at the most important holiday shopping season reporting quarter known as “Christmas?” That would make that business model now less appealing to anything thought to be a growth, no? Actually, it would put it far more into the contracting camp, yes? So why then is a now +25% move in its share price (+$100B gain so far) Easy, my conjecture…

Welcome to “YOLO Lottery Ticket Bingo Bonanza” where both amateur and professionals now play in (as well as play) the 0DTE option market (e.g., less than 24hrs till expiry) that hit another record high this week. i.e., What was once around a 5+% share of market is now a whopping 50+% and growing. That’s why, period. Full stop. It’s rampant – and it’s everywhere. It now is the “market.” I only have one thing to say about it…

Good luck with that, you’re gonna need it. Remember – it works just as well for going down as it does up. Right now, it’s up. Or, as implied in the old joke from grade school, just wait till “It’s your turn in the tree.”

© 2023 Mark St.Cyr

Addendum: If you think the hypothesis is wrong in the above, I only ask you to question the following and come to your own conclusions…

If you look at the headlines from Apple™, Alphabet™ and Amazon™ that one day later, why did their YoY reporting numbers that were much like FB’s (e.g., down around ~5%) get hammered when FB’s was rewarded? Hint: The algos read “missed estimates” in every one. Only FB’s said “Beat.” Which enabled the algos to mercilessly beat any and all shorts which were a plenty.

Simple as that.

Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.