Meta Meta Meta

Meta growth grinds to a halt, Qualcomm is firing on all cylinders

Equities 6 minutes to read
PG
Peter Garnry

Head of Equity Strategy

Summary:  Yesterday's earnings from Meta and Qualcomm is the story of a cheetah at its maximum speed and a pause after an intense hunt. Based on Meta's own Q2 revenue guidance growth will go negative for the first time in the company's history as lack of tracking on iPhones is putting massive pressure on ads pricing. Qualcomm on the other hand is expected to 30% y/y in the current quarter as the company's products are in high demand with no slowdown in sight.


Meta to hit negative growth in Q2 for the first time ever

Meta shares are up 17% y/y as investors were relieved about the Q1 figures showing revenue came in line with estimates at $27.9bn and EPS at $2.72 vs est. $2.56. The investor reaction is unusual because the Q2 revenue guidance at $28-30bn was below estimates of $30.7bn something investors would typically have punished hard. It shows that sentiment was significantly worse than expressed by analysts in their estimates.

If we take Meta’s revenue guidance at the mid-point then the company will experience its first y/y decline in revenue in the company’s history which is a significant event. As the revenue growth chart shows, the declining revenue growth was already a trend before the pandemic, and the pandemic actually bought Meta a couple of years more with high growth masking the underlying structural issues. Maybe why investors and Meta themselves have surprised by the impact from TikTok? Another disturbing fact about Meta’s result was 1) the $3bn operating loss in its Reality Labs segment (metaverse/Oculus bet), and 2) that advertising pricing was -8% vs est. -4% which means that the way Meta mitigated the falling prices, likely stemming from losing tracking ability on iPhones, were to serve more ads which they did by serving 15% more ads compared to 12.8% estimated by analysts.

Source: Saxo Group

Qualcomm is not running out of demand anytime soon

As with Nvidia, Qualcomm is one of those companies in the semiconductor supply chain that is riding all the big trends from headsets, electric vehicles (use more semiconductors), and Internet of Things (IoT). The wireless communication and chip maker delivered revenue of $11.2bn vs est. $10.6bn and sees current quarter revenue at $10.5-11.3bn vs est. $10bn  and current quarter EPS of $2.75-2.95 vs est. $2.60 with the CEO saying demand is looking strong across all end-markets and that supply is improving. Qualcomm shares are up 8% in pre-market trading.

Source: Saxo Group

With the earnings releases yesterday EPS growth q/q is now negative both MSCI World, S&P 500, and Nasdaq 100 suggesting rising input costs are having a real negative impact on aggregate earnings.

Disclaimer

The Saxo Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.