Meta Grows its Subscriber Base: Good News for Tech?

Mixed Results

Meta Platforms (FB) share price popped after it beat on earnings and also announced it added more users than analysts expected in the first quarter. This follows the previous quarter when poor results triggered a 26% plunge in its share price, the largest loss ever recorded for the S&P 500.

CEO Mark Zuckerberg threw some cold water on the report, stating the company intends “to slow the pace of some investments,” which could put a limit on short-term growth. Last quarter’s revenue increased at its slowest pace since the company went public about a decade ago, with profit down 21% compared to the prior year.

WhatsApp with Tech Stocks?

Technology stocks got a lift on the news of Meta’s user-base growth, as investors look for signs that the sector can weather inflationary headwinds. Other tech companies have recently stumbled amid economic and geopolitical concerns. Google parent company Alphabet (GOOGL) saw its share price decline following weaker-than-expected revenue growth, while both Netflix (NFLX) and Spotify (SPOT) tumbled after announcing the net loss of subscribers.

A company’s bottom line is driven by the ability to scale as well as their revenue model. In the case of streaming platforms, the market may be saturated leaving companies like Netflix vulnerable, as they rely solely on subscription fees unless an ad-based tier is introduced.

Proceed with Caution

While investors may see optimism in Meta’s results, some market observers preach the need for caution. In Q1 the US economy contracted at a 1.4% annual rate. This coupled with the Russia-Ukraine war, inflation, and rising interest rates present a series of challenges that may limit growth potential. The ongoing volatility in the stock market is reminiscent of the financial crisis of 2008, reflecting widespread uncertainty.

With tech stock shares trading at lofty levels — last fall Netflix traded at 70 times earnings — investors may find themselves questioning if companies’ valuations truly reflect their post-pandemic potential.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS22042901