Daily Brief: It's Almost As Though Meta Has The Same Old Problems Hiding Behind This All-New Identity...

Daily Brief: It's Almost As Though Meta Has The Same Old Problems Hiding Behind This All-New Identity...

about 2 years ago3 mins

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Meta’s stock plummeted after it posted disappointing results late on Wednesday, suggesting investors aren’t exactly convinced by Facebook’s new look.

What does this mean?

Meta makes most of its money by selling its users’ attention to advertisers, and it did reliably well on that front: ad revenue ticked up by a better-than-expected 20% compared to the same time in 2020. Likewise, revenue from its Reality Labs segment – where the metaverse magic happens – was up 22%. So far, so good.

MAU growth stalls

Then again, there were fewer eyeballs on its platforms than analysts were expecting: the number of Meta’s monthly active users grew by a weaker-than-expected 9%. Its outlook for this quarter wasn’t what anyone had hoped for either, with Meta warning that inflation and supply shortages would take their toll on advertisers’ budgets. That didn’t go down well: its shares initially plunged 22%.

Facebook stock
Source: Google Finance

Why should I care?

For markets: New name, same problems.

Meta’s Reality Labs is growing, sure, but the segment still posted a $3 billion-plus loss last quarter. And Meta hasn’t exactly filled investors with confidence that it can pull off its more ambitious enterprises: the company’s most recent moonshot – a bid to launch its own cryptocurrency – ended with a whimper this week after regulatory pushback drove the company to scrap the plan altogether.

The bigger picture: NFTs FTW.

You’re much more to Meta than just a walking, talking data point it can sell onto advertisers for a quick buck, you know: you’re a walking, talking cash piñata too. It emerged late last month that the company’s working on features across Facebook and Instagram that would allow you to mint your own NFTs, and it’s even reportedly discussed a marketplace where you can buy and sell them too. That’s one cash cow the company has left unmilked up to now, which could be udderly short-sighted: investment bank Jefferies thinks the NFT market could double to $80 billion by 2025.

NFTs 2021

Keep reading for our next story...

PayPal Announced A Not-So-Super Set Of Results

PayPal image

PayPal announced disappointing quarterly results this week, but it might only be a matter of time before the payment giant’s “super app” sends its stock up, up, and away.

What does this mean?

PayPal wasn’t feeling much love last quarter: long shipping delays and the end of lockdowns made online shopping much less desirable than in-person browsing, and what money customers had to spend was limited by the higher prices of everyday essentials. eBay didn’t help much either, pushing its users toward its own payment system and continuing to poach transactions from one-time partner PayPal.

PayPal earnings
​Source: PayPal

PayPal’s users, then, only spent 23% more last quarter than the same time the year before, leading the company’s total revenue to grow just 13% – its smallest uptick in two years. And don’t expect a swift turnaround: PayPal revealed a worse-than-expected outlook for revenue and new user accounts in 2022, which might be why investors initially sent its shares plunging 17%.

PayPal stock
Source: The Wall Street Journal, FactSet

Why should I care?

Zooming in: Is it a bird…?

PayPal’s trying to keep users on its platform by becoming a “super app”, having recently added savings accounts and crypto trading. And it seems to be working, with the company reporting that the average active user now makes 45.4 transactions – up on the 42.9 analysts were expecting. That might be just the start: PayPal’s reportedly planning to launch a suite of investment products fit to rival Robinhood’s too.

The bigger picture: PayPal’s backup plan.

PayPal announced last month that it’s thinking about launching its own stablecoin – a cryptocurrency that would be pegged to the value of the US dollar, making it much less volatile than the likes of bitcoin and ether. “PayPal Coin” would be an alternative way of making payments on its platform, and could render them cheaper and more secure. The company’s been a bit slow on the uptake, mind you: Visa not only accepts stablecoin transactions, it’s already moved on to developing a range of stablecoin-focused products.

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