Quarterly earnings and nervousness in the markets on the realization that once geopolitical tensions are resolved everyone has the cards to get back on track, let’s take a look together at why and how the shares of Microsoft, Tesla, Meta, and Robinhood performed on the stock market.
The parent company of Zuckerberg’s social constellation is struggling on the income side and is setting as its next goal better revenue management to more calmly meet the challenges facing its businesses.
Advertising revenue, which is the core business by which the US company monetizes, declined and consequently so did revenues, which fell 4% to $27.7 billion for the third quarter.
The average revenue from a social ad dropped by 18% and this translates into less money to invest and use for the giant’s ongoing expenses.
Nonetheless, the group’s platforms are increasingly being used to the point of reaching 2.93 billion users worldwide (+4%) year on year.
4 are the billions of additional expenses compared to 2021 largely due to a greater flow of resources into research and development, this resulted in operating profit declining by 45.7% to $5.6 billion.
The metaverse group estimates last quarter total revenue of $30/32.5 billion.
Meta discounts the huge effort put into efficiency and research investments aimed at closing the gap with present-day opponents such as TikTok and those of the future such as The Nemesis and others, “an estimated $ 900 million in additional consolidation costs.”
A loss of about $3.7 billion in Q3 was found from the Reality Labs Meta business, or the division responsible for the implementation and development of Zuckerberg’s metaverse.
In an eloquent letter to Mark Zuckerberg and the board of directors, Altimeter Capital CEO Brad Gerstner, an investor and partner in Meta and formerly of Facebook, peremptorily stated:
“An estimated $ 100 [billion] investment in an unknown future is huge and terrifying, even by Silicon Valley standards. We have no doubt that investors and others would happily support the increase in these investments as the [return on investment] becomes more tangible, albeit still in the long term.”
The less-than-stellar quarterly results and uncertainties about the company’s future drove Meta’s shares down -8.8% in after-hours trading.
Sophie Lund-Yates, Chief Equity Analyst at Hargreaves Lansdown commented on Meta’s results this way:
“Meta’s platforms don’t have as much power over marketing teams as they should. This isn’t the first time the social media giant has fallen behind, and that reflects the fact that the competition is fierce, with younger entrants like TikTok a serious opponent. In such uncertain and difficult times, all the big names are struggling, but Meta’s inability to maintain its customers’ portfolio share is worrying and keeping bettors at the expense of price cuts.
The potentially limited nature of advertising as a revenue stream is not lost on management, and this is where the big metaverse plans come into play. Unfortunately, the launch and adoption of the group’s virtual reality products leaves much to be desired, despite the seemingly endless upward spiral of the R&D budget. This is problematic because Meta has no other income streams to fall back on, so as it stands, when advertisers turn off the tap, Meta’s revenue funnel runs out very quickly. Efforts to enhance efficiency plans suggest difficult conditions ahead, although activists will be saddened to hear that these plans do not extend to staff reductions in the current budget.
There will be some who will say that the 62% year-to-date drop in Meta’s share price has gone too far, and it’s true that the tech giant still has huge dimensions thanks to its billions of active users. This alone means it cannot be immediately canceled and there is the potential for growth to return. The problem is that the economic divide separating Facebook and Instagram from its rivals is narrowing, with no clear path to follow for further successful monetization of its other apps and products, and that could very quickly culminate in a major problem.”
Tesla (TSLA) stock
The California-based company founded in 2003 by Elon Musk and associates, closed up 1% in the last trading session on Wall Street to $224.64, and in after hours it is expected to open in the same range today.
The problems with self-driving cars encountered by the electric mobility company have not caused too much panic in the markets partly but not only thanks to the soundness of the development team, which wasted no time in getting to work immediately to implement the self-driving system in the Model 3 and Model Y.
The US giant’s centered quarterlies have galvanized investors and in the long run, the future is positive.
Days ago news of some logistical problems for the Berlin gigafactory related to battery production were immediately resolved through the intervention of the team in Texas while it is today’s confirmation that for the European market, Musk’s cars will have special liveries ad hoc for the countries of the continent enriching the offer of customizations.
Microsoft (MSFT) stock
The tech giant founded by Bill Gates and Paul Allen nearly 50 years ago came to the release of its umpteenth quarterly report, its third of the year.
The big tech company ended the period with earnings and revenue that exceeded expectations set as a target, even though cloud-related revenue and guidance disappointed analysts somewhat.
The stock lost 7% in after-hours trading in New York due to a lackluster quarterly earnings report.
Earnings per share came in at $2.35 versus the $2.30 expected while revenue closed at $50.12 billion exceeding estimates that set the bar at $49.61 billion.
The guidance rose to the role of a sore point becoming the cause of the stock’s thud.
For the latest fiscal quarter, the company estimated revenues between $52.35 billion and $53.35 billion, a 2% jump when averaged over the range.
Microsoft’s gross margin narrowly missed the outlook by standing at 69.2% against the 69.8% expected.
From a low of $6.81 per share in mid-June 2022, the stock experienced a gradual climb back up the slope to double digits at $11.08 per share yesterday (+2.31%).
The stock is also expected to rise for today, a signal of strength that confirms the trend against the market sign.
The Menlo Park (CA) based American financial services company will be one of the last companies to release its quarterly report for the third quarter of the year exactly on 2 November.
The only note of concern for investors relates to the ongoing lawsuit under which Robinhood (HOOD) must defend itself against allegations of market manipulation following restrictions on operations that occurred in conjunction with the meme stock rally in 2021.