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Thursday, October 26

Meta Issues Dire Warning for Q4

Meta more than doubled their profits but still managed to spook the market

Meta stock faced heavy sell pressure in early trading after the company posted an incredible amount of growth in their earnings report. 

Meta sent their revenue into the stratosphere, growing 23% to $34.2 billion for the quarter. The Street had ridiculously high expectations for Meta and the company managed to smash through them. More importantly, Meta has found a way to intensify their efficiency play, boosting profits a ludicrous 168% to $4.39 per share. And yet, Meta stock has faced nothing but sell pressure since this incredible call. What is happening? 

Even though Meta maintained guidance ahead of The Street's expectations, Meta's CFO did warn of softening advertisement demand at the beginning of Q4, potentially due to a quick slowdown that was set off by the conflict in Israel at the start of October. This lined up with reports coming out of Snap yesterday to basically kick off a wave of fear in Meta's stock price. Is that soft demand a show of systemic weakness, or a quick blip? Premarket traders chose to be fearful.

This is perhaps one of the biggest shows of how wild our economic moment is. GDP growth surged to 4.%, and yet traders are looking for any excuse to believe the bottom is finally falling out of this economy. Meta's earnings demonstrate incredible competency as they refine their new efficient model. The only genuinely negative thing in Meta's earnings was a wider loss posted by Reality Labs, but those are deeply offset by how strong the advertising business is. But, with demand concerns popping up in lots of different companies as Q4 kicks into high gear, investors are simply afraid of any company that relies on ad revenue. This makes sense in a way, because when a recession or market drawdown actually starts, advertising revenue is always the first thing to go. Until we're back at 100% confidence, we'll see quick selloffs like this in Meta and Alphabet whenever investors catch even the smallest whiff of a potential slowdown. 

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