Hopes for Meta Platforms Inc (NASDAQ:FB) earnings on Wednesday night are even lower following disappointing results from Snapchat owner Snap the day earlier.
After October's third-quarter earnings from Meta missed expectations and guidance on fourth-quarter revenues was lowered the stock fell to a seven-year low in November, below U$90, prompting boss Mark Zuckerberg to axe 11,000 jobs - around 13% of the workforce - and issue a mea culpa, with the shares rebounding over 50% since, back over US$150 this week.
After Snap warned revenues could decline by as much as 10% in the first quarter of 2023, analyst Neil Wilson at Markets.com said "it could be tough" for Meta.
Earnings per share are forecast to fall around 40% to US$2.20-2.25 on revenues of US$31.55bn.
TickMill market analyst James Harte said: "If seen, this would mark a firm uptick from the prior quarter’s results and put an end to two consecutive quarters of earnings declines."
After the jobs cuts, traders will be looking to see how this has impacted Meta’s margins, while another big focus will also be on Meta’s Reality Labs spending, as the group has been pumping money into VR and AI, with US$4bn losses as of last quarter.
If losses at Reality Labs have grown this "will likely weigh on trader sentiment", Harte said.
Analyst Matt Britzman at Hargreaves Lansdown agreed, saying the company is in "somewhat of a downward spiral", as costs rise and advertising spending falls.
While steps are being taken to reign in some damage, he said the "stubborn approach" to investment in Reality Labs was the bugbear for investors.
"It’s certainly possible Meta gives the market what it wants, a rein in on spending. But until that happens, or Reality Labs conjures up some magic, we don’t see sentiment changing too much.”