Bloomberg Market Specialists Joe Choi and Keith Gerstein contributed to this article. The original version appeared first on the Bloomberg Terminal.
Background
Meta Platforms Inc. has long dominated social media and online advertising. But investors are increasingly concerned about weaker growth forecasts and Meta’s high capital expenditures on virtual and augmented reality technology.
Meta recently announced continued investment in subsidiary Reality Labs, with 20% of 2023’s costs going toward the metaverse-focused division, up from 18% this year. Meanwhile, the company’s stock is down 65% in 2022.
The issue
Meta’s increased spending on AR, VR and the metaverse has raised questions from investors. The Reality Labs business has posted significant operating losses, which are forecast to grow again in FY2023. Meta’s focus on VR has also attracted regulatory scrutiny, with the Federal Trade Commission attempting to block Meta’s acquisition of Within, the maker of fitness app Supernatural.
Meanwhile, Meta’s overall revenue growth is expected to decline in FY2022 but rise by 4.85% in FY2023 after years of double-digit gains. This slowdown is accompanied by Meta’s rising capital expenditures, which in FY2023 will be more than double 2020 levels.
In November, Meta attempted to offset some of these costs by laying off 11,000 employees.
“Meta remains too aggressive with its investments in long-term initiatives despite a sharp deceleration in expected revenue growth,” said Mandeep Singh, Bloomberg Intelligence’s senior industry analyst. “While the company has curtailed its opex view with job cuts and hiring freezes, its capex view for 2023 is surprising, given the lack of traction so far with its metaverse efforts.”
That said, Meta’s advertising revenue remains a strength, as its 2021 performance was more than double the combined ad revenue for Alphabet’s YouTube, Tencent’s social media segment, Twitter, Snap and Weibo.
Tracking
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