🤖 Facebook’s first Meta earnings
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Hey Snackers,
Bill Murray, hold on to your winter coat: Punxsutawney Phil “saw his shadow” on Groundhog Day (yesterday), which means the US can expect six more weeks of extra-chilly temps. On the flip side: Phil’s accuracy rate over the past decade is only 40%.
Stocks jumped after killer earnings from Google. Meanwhile, the US said it’s deploying 3K troops to Eastern Europe as Russian soldiers continue gathering near the Ukrainian border. President Biden has said the US will respond with strong economic penalties if Russia invades Ukraine.
Meta’s shares tank on bummer earnings, while its metaverse investments weigh on profits
Cue the “Social Network” soundtrack... Tension is rising at the company formerly known as Facebook. Meta shares tanked 22% after the company disappointed on earnings and user growth. Meta’s quarterly revenue growth slowed, with sales up just 20% from a year ago (compared with 33% growth the previous quarter and 56% before that). Even worse: Quarterly profit fell by $1B from a year earlier.
- Meta blamed Apple’s iOS update, which lets users opt out of ad tracking, and inflation and supply issues for hurting advertiser spend. Ads still make up 97% of Meta’s revenue.
- Awk: Google just posted its third straight quarter of record sales despite facing the same challenges, as holiday searches drove ad spend.
An Oculus for Hanukkah... Smart Ray-Bans for Christmas. This holiday quarter was the first that Meta broke out results for Facebook Reality Labs, which houses its VR and AR goodies. Think: $200 Oculus VR headsets, which are required to access Meta’s immersive “Horizon Worlds.” ICYMI: Meta is positioning itself as a metaverse company, not a social company. How it’s going:
- Virtual $$: Reality Labs brought in $877M in quarterly revenue, slightly up from a year ago. But its operating loss was $3.3B.
- To build an immersive meta-future, Meta says it’ll spend $10B over the next year. It’s a big bet that’s currently hurting profits.
- A bet that didn’t pan out: Meta just ended its cryptocurrency project, Diem (fka: Libra), selling it for $200M after years of regulatory pushback.
The metaverse = a major conversation-shifter... because Meta doesn't want you talking about its failed crypto project, regulatory scrutiny, misinfo issues, and Insta’s mental-health toll on teens. Zuck hopes that by 2030 the metaverse will reach 1B people and generate hundreds of billions in commerce sales. Microsoft, Roblox, and Nvidia are also investing in a meta-future. But today Meta is still an ad-based social giant with the same sticky problems.
Shamu icon SeaWorld makes a $3.4B bid for rival park chain Cedar Fair to diversify its footprint
Shamu meets the Millennium Force… Bring a poncho. SeaWorld has made a splashy comeback since the pandemic forced it to shut down parks and furlough nearly all its employees in 2020. Last quarter, SeaWorld’s sales hit a record as thrill-seekers returned to its water parks for holiday-themed nights (see: Howl-O-Scream). Now SeaWorld wants to double down by buying fellow amusement-park operator Cedar Fair for $3.4B. What’s on the table:
- Cedar owns 11 US-based amusement and water parks, including California’s Great Americas. SeaWorld owns 12 US parks, so it could double its footprint with the acquisition.
- Deal déjà vu: Rival Six Flags offered to buy Cedar Fair for $4B back in 2019, but was rejected because the price was "too low." Not promising for SeaWorld’s $3.4B bid.
Beached… amusement parks were feeling the pain mid-pandemic. And despite the record revenue, SeaWorld’s attendance still isn’t back to pre-pandemic levels. Tighter international travel requirements have stalled the return of foreign tourists, which made up more than 10% of SeaWorld’s guests. But Americans are starting to fill the spending gap:
- NBCUniversal’s theme-park division just posted its most profitable quarter ever as domestic visitors splurged on souvenirs and pretzels. Cedar Fair also saw record revenue and in-park spending last quarter.
Spreading out can minimize risk… if one region gets hit hard. SeaWorld’s properties are primarily scattered across densely populated warm-weather states, like Florida and California. Meanwhile, Cedar Fair’s parks dominate the Midwest and rural areas. While Omicron continues to threaten recovery, diversifying location “portfolios” can help spread out risk. And could lead to billions in extra sales for SeaWorld.
What else we’re Snackin’
- Request: Venmo owner PayPal had its worst trading day of all time, with shares plunging 24% on a weak yearly forecast (fewer than 20M new accounts vs. 49M last year). Inflation is curbing spending and pizza IOUs.
- Text: Former NFL coach Brian Flores is suing the league, alleging racial discrimination. Flores, who is Black, said he found out by text message that someone else had gotten a coaching job days before his interview.
- Auto: GM self-driving-car unit Cruise secured a $5B credit line to help launch its autonomous ride-hailing biz (think: Uber for robotaxis). This month GM started assembling 100 Cruise Origin shuttles.
- Breathe: Meditation app Calm bought Ripple Health, a site that connects users with healthcare options. Ripple said it’s going to build a suite of mental-health services to replace Calm’s employer perk, Calm for Business.
- Spotty: Spotify shares fell as much as 17% after the pandemic thriver disappointed on user growth and paid subscription forecasts for the first quarter. It didn’t mention the Joe Rogan Covid-misinformation controversy.
Thursday
- Weekly jobless claims
- Earnings expected from: Amazon, Merck, Shell, Ford, Cigna, Activision, Snap, Estee Lauder, Motorola, and Hershey
Authors of this Snacks own shares of: Amazon, GM, Snap, Ford, Spotify, Microsoft, and Alphabet
ID: 2021751