Meta plunges on weak outlook; Amazon earnings key risk Meta plunges on weak outlook; Amazon earnings key risk Meta plunges on weak outlook; Amazon earnings key risk

Meta plunges on weak outlook; Amazon earnings key risk

Equities 6 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  In today's equity update we focus on Meta, the parent company of Facebook, which surprised investors last night with a much weaker than estimated guidance on Q1 revenue due to rising pricing pressures in its ads business and more competition from TikTok. The revenue guidance will make it difficult for Meta to hit the 15% revenue growth in 2022 that analysts were expecting. Combined with higher investments in 2022 driven by its Metaverse bet, the ROIC will likely also begin trending down adding pressure to the share price. Finally, we are looking at Amazon ahead of its Q4 earnings release tonight which is the biggest risk to equities overnight.

Meta shares down 22% in pre-market trading

US equities are weaker following the recent rebound with Nasdaq 100 futures 2.9% lower from yesterday’s intraday high. The reason for the rolling over in equities is the weaker than expected outlook from Facebook’s parent company Meta.

Meta reported Q4 MAU figures of 2.91bn vs est. 2.95bn and EPS of $3.67 vs est. $3.84 with revenue of $33.7bn in line with estimates. However, it was the Q1 revenue guidance of $27-29bn vs est. $30.3bn that spooked the market and an accelerating operating loss of $3.3bn in its Reality Labs segment which covers the new Metaverse bet. The reasons behind the lower than expected revenue in Q1 are headwinds on impression and pricing, which is a function of increased competition from among other TikTok and Facebook being on the backside of front-loaded advertising spending by customers.

If Meta hits revenue of $28bn in Q1 it would translate into a meager 6.9% y/y growth which is a sharp decline in growth from 19.9% y/y in Q4. With estimates looking for 15% revenue growth in 2022 it means that growth expectations will have to be lowered. This is in itself negative for equity valuations relative to the implied market expectation but the increased investments in the Metaverse combined with pricing pressure in the ads business could cause ROIC to roll over from the current ROIC of 33.3% in Q4 (see chart). If both ROIC and revenue growth are coming lower vs expectations then it is poison for the equity valuation and it that light the pre-market trading makes sense.

Meta shares are down 22% in pre-market trading (red line in chart below) and given its 2% weight in the S&P 500, the indicated decline alone with contribute 0.44%-point negative impact on S&P 500. With the indicated decline the current free cash flow yield is 5.6%.

Source: Saxo Group
Source: Saxo Group

Amazon earnings is a key market risk tonight

The next earnings risk to US equities is Amazon reporting Q4 earnings tonight. Analysts are expecting revenue growth to decline to 9.8% y/y down from 15.3% in Q3 as pandemic tailwinds are fading. Massive investments in fulfillment centers and other logistical operations have caused free cash flow to plunge to around $-2.3bn in the past 12 months. Investors will likely want to see signs of investments coming down and free cash flows up or otherwise the equity valuation could come under pressure. The two key things to watch tonight is guidance on revenue growth and operating margin with the latter posing the biggest downside risk for the company due to rising input costs on wages and logistics.


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.