September 27, 2022

Premarket stocks: Meta earnings and the metric Wall Street is obsessing over

5 min read



A version of this story first appeared in the CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up. right here. You can listen to the audio version of the newsletter by clicking on this link.


London
CNN Business

Every quarter, investors on Wall Street analyze earnings for Intel, how much the company brings in, and the volume of its profits.

But this season has served as a reminder of how many traders in the fast-growing tech stock have valued another metric. They are obsessed with scale, as measured by the number of users and subscribers.

What’s happening: Facebook

(FB)
Shares of parent meta Pre-market trading increased by 16%. The company’s first-quarter results were announced on Thursday.

This is partly because of the low expectations of the social media platform. The previous consignment of these results was so devastating that it caused the stock to fall by 26%, causing the biggest loss in market value for the S&P 500 company on record.

However, there is significant relief for Meta user numbers, which were stagnant. Although slightly lower than Wall Street expected, it increased during the first three months of the year.

“Meta results were great, everything was considered,” Laura Hoy, an equity analyst at Hargreaves Lansdown, told me. “Much of this was based on an increase in the number of users posting.”

Monthly active Facebook users increased by 3% year on year, while daily active Facebook users increased by 4%. The monthly and daily active users of the Meta app family, including Instagram and WhatsApp, grew by 6% each.

The rise of Facebook is the reverse of what happened with Netflix.

(NFLX)
Previous Week.

Shares of streaming service torn The company said it lost 200,000 subscribers in the first three months of the year, when it expected an increase of 2.5 million. It was the first time Netflix had lost a quarter in more than a decade.

These numbers are important for both companies for slightly different reasons.

Since Netflix doesn’t run ads – at least not yet – subscription fees are its main source of revenue.

In Meta, meanwhile, its huge combined user base of nearly 3 billion people benefits it as it competes with TikTok, Snapchat for advertisers.

(Suddenly)
And other social media sites.

But the scale is also necessary to justify the extremely rich prices of these companies. A year ago, Facebook was trading at more than 30 times its earnings over the last 12 months. As of late October, Netflix was almost trading. 70 times Earnings

A big factor: the promise that these companies will be able to use their large customer bases to make more money in the future. When growth slows significantly, it greatly damages the investment proposal.

“Investors have become accustomed to seeing huge numbers of users,” Huay said. “And as it calms down, it raises the question of whether these prices, which have grown so much in the last few years, are worth it.”

This is especially true in light of the current scrutiny of tech firms, which look less attractive as interest rates rise. Wall Street is keeping a close eye on whether it is passionate about big-tech names during epidemics.

Look at this place: Meta has not shed consumer blood in the last quarter like Netflix. But other numbers push it harder as it battles rivals such as Tick Tick, struggles to monetize popular video content, and changes to Apple’s privacy practices disrupt its core advertising business. Deals with

Mark Zuckerberg’s company posted its slowest earnings growth in years, saying its profit was 21 percent lower than a year earlier. But investors are ignoring these developments, at least for now.

Indonesia is embarking on a ban on palm oil exports – a move that could exacerbate the global food crisis and push up the prices of hundreds of consumer products.

According to my CNN business partner Michelle Toh, the country suspended exports of cooking oil and the raw materials used to make it on Thursday to secure local supplies.

The Southeast Asian nation is the world’s largest producer of palm oil, a common ingredient found in many foods, cosmetics and household items. The WWF estimates that it is used in about 50% of all packaged products in supermarkets.

Last week’s shocking announcement pushed up commodity prices. In Malaysia, the world-class crude palm oil futures rose nearly 7%.

Now the market is in a race to digest the effects. According to Goldman Sachs analysts, the scope of the agreement signed Wednesday is wide. He said that although there was some speculation that it might be more limited, it could eventually account for about 90 percent of Indonesia’s total palm oil exports.

Palm oil prices were already under pressure after Russia’s invasion of Ukraine, as markets struggled to find alternatives to shipments of sunflower oil stranded in Black Sea ports.

Indonesia’s export ban could worsen the situation. James Fry, chairman of consultancy LMC International, said prices of items such as cooking oil, instant noodles, snacks, baked goods and margarine could rise as a result.

“We have the best storm,” he said. He added that droughts in South America and Canada have also cut off supplies of soybean oil and canola oil.

On the radar: An important question is how long Indonesia’s ban will last. It is in place “until further notice.”

Japan’s yen has not weakened in 20 years, shaking foreign exchange markets as investors rush to determine the extent to which the currency could fall.

UPDATE: The Japanese yen depreciated sharply after the Bank of Japan meeting on Thursday. It last traded at over 130 against the US dollar, its worst level since 2002. The currency has fallen more than 13% against the dollar since the beginning of the year.

Deviations have been fueled by differences in the central bank’s strategy. The Federal Reserve is in the process of withdrawing support for the economy to fight the highest inflation in decades. But the Bank of Japan has a different plan.

According to ING senior economist Man Joo Kang, when the BOJ met on Thursday, it “clearly indicated that it is not ready to end its easing policy as its inflation target is yet to be met.” very far.”

Governor Haruhiko Kuroda said the bank intends to keep the money flowing until it sees sustained inflation close to 2%. Inflation, or falling prices, also creates problems for growth. Consumer price inflation in Japan rose 1.2% for the year ended March, compared to 8.5% in the United States.

But if the yen continues to fall, it could increase the cost of living for people in the world’s third-largest economy and make it more expensive for businesses and consumers to buy imported goods. The corona virus could hinder Japan’s recovery from the epidemic.

Craig Botham of Pantheon Macroeconomics told clients that “the weakness of the yen, at the moment, reduces disposable income and increases the cost of firms, leading to a material drag on economic activity.”

Ultra

(MO)
Caterpillar

(Cat)
Domino’s Pizza

(DMPZF)
Hershey Foods, MasterCard

(Master of Arts)
McDonald’s

(MCD)
And Twitter

(TWTR)
Report results before US markets open. Amazon

(AMZN)
apple

(AAPL)
Intel

(INTC)
And stop

(ROKU)
Follow after closing.

Even today: The first look at US GDP for the first three months of the year comes at 8:30 AM ET.

Coming up tomorrow: The latest reading of the Federal Reserve’s preferred measure of inflation, the price index of personal consumption expenditure.



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