At some point the market has got to reconcile with economic reality. META is a case in point.
- META’s core business is selling Ads. META’s price per Ad declined 16% year-over-year for calendar 2022 and declined 22% year-over-year in Q4’22 (unit pricing is likely to get worse in my view in 2023).
- META’s Q4’22 Revenue was down. Revenue is likely to be flat to down for Q1’23 and for the year (my common sense guess is down for the year, META did not provide a 2023 Revenue range).
- Investors however are bullish on META’s turnaround because of more headcount cuts and a new share buyback plan? Cutting heads and buying back stock (if the share buyback is actually executed), is a short-term trick that won’t solve operating issues including META’s tired product set.
From a macro standpoint, we have a softening macro-economic backdrop and the Fed continues to tighten. We’re not pivoting anytime soon and we will have a long Fed pause before rates come down and before QT stops. Further, if inflation were to go to zero tomorrow, the prices for goods and services are so elevated that the Consumer won’t be in a stronger position. This recession is baked in. Eventually the market will reflect this economic reality.