Meta Platforms (NYSE: META) is partnering with Indian conglomerate Reliance Industries to let consumers shop for groceries on WhatsApp. India is the largest market for WhatsApp and the company also has a payment system in the country using the country’s UPI (Unified Payments Interface) system.
Along with WhatsApp, Meta Platforms also owns Facebook and Instagram. It has also been working to develop its metaverse but the business lost over $10 billion last year and looks set to lose an even bigger amount in 2022.
Meta Platforms’ growth has sagged this year. In the second quarter of 2022, the company reported revenues of $28.82 billion which were slightly below estimates. However, and more importantly, it was the first time since the company went public that its revenues fell on a YoY basis.
Meta Platforms Reported a YoY Fall in Q2 Revenues
Meta Platforms projected that its revenues would fall YoY in the third quarter as well. Commenting on the guidance, it said, “this outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty.”
To be sure, all the FAANG constituents are witnessing a growth slowdown. Netflix lost streaming subscribers for the first time in a decade. Revenue growth for Alphabet and Apple has also sagged. Amazon’s sales growth in the second quarter of 2022 was also the lowest in over two decades.
In the case of Amazon, Alphabet, and Apple, the sales slowdown is also due to the high base year effect. While the same also holds for Meta Platforms and Netflix, both these companies are facing structural issues.
FAANG Stocks Have Crashed in 2022, Netflix is the Worst Performer
Netflix’s growth has peaked in key markets. It is now looking to launch an ad-supported tier, which would reportedly be competitively priced between $7-$9. The company is also looking to crack down on password sharing and is cutting costs aggressively, including by canceling shows and laying off employees.
Meta Platforms is also facing structural issues. Facebook has reached peak penetration in most markets and the app’s popularity has fallen among teens. There is a global clamor over data privacy issues and targeted ads which is hurting social media companies.
Apple’s iPhone privacy rules were also a dampener for Meta Platforms and the company estimates that it would lose up to $10 billion in revenues this year due to the new privacy rules.
All the FAANG stocks are in the red this year but the price action of Netflix and Meta Platforms has been quite depressing. While Netflix is the worst performing FAANG stock with a YTD loss of over 60%, while Meta Platforms has also lost over 50%. While Netflix is up sharply from its 2022 lows, Meta Platforms stocks continue to languish near its 52-week lows.
Analysts See Meta Platforms Stock as a Buy
While Meta Platforms’ core social media business has been feeling the heat from falling digital ad spending, its metaverse business is still years away from contributing meaningfully to the earnings. Recently, Vivek Sharma, who was the vice president of Meta’s Horizon social media virtual reality software, announced his exit from the company.
Some of the Wall Street analysts are however bullish on Meta Platforms stock and recommend buying the stock. Earlier this week, JMP reiterated the stock as overweight and called it a “compelling” opportunity. Bank of America also added the stock to its top US picks while removing Alphabet. However, the brokerage continues to have a buy rating on Alphabet stock also.
WhatsApp Partners with Reliance in India
Coming back to Meta Platforms’ deal with Reliance’s Jio, the social media giant is now betting on the Indian grocery market. The country is the second most populous globally but the retail sector is mostly unorganized. Both Amazon and Walmart are betting on the digitization of the Indian retail market and the latter acquired Indian e-commerce company Flipkart.
With Meta Platforms partnering with Reliance Jio, the competition in Indian retail markets looks set to heat up further as US tech giants vie to grab a pie of the country’s fast-growing retail market.
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