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The market has collapsed and Meta Platforms (NASDAQ:META) continues to hit new lows after the weak fourth-quarter self-inflicted earnings report. While the company plans to operate in a lighter and meaner way, Meta is starting to win against TikTok in short video. My investment thesis is ultra-optimistic on inventory after the erasure period, with the company having the ability to increase its profits through leverage.
Source: FinViz
Metaplatform platforms controlled through Facebook and Instagram were a dominant player on social media until TikTok arrived with engaging short videos. percentage videos.
Meta brought Reels to Instagram just 2 years ago and the bureaucracy of the U. S. government was in the doldrums. The U. S. continues to push for TikTok to be blocked from app stores. The most recent report covers knowledge shared with workers in mainland China and appears to clash with measures taken through Apple (AAPL) to limit knowledge sharing through privacy controls. The EE. UU. no government seems willing to force a TikTok blockade, so Meta only wants to capture users to win the segment.
Although the knowledge of this study is ancient, user engagement is particularly higher when the length of the videos is short. Videos longer than 60 seconds had a 68% increase in engagement, while those over 1200 seconds (20 minutes) had low engagement. of only 25%.
Source: Corporate Video Report 2019
The short video presented through TikTok is so popular that U. S. adult users are so popular. U. S. consumers spend more time on the Chinese platform. According to eMarketer, adult users spend 38 minutes on TikTok and only about 30 minutes on Facebook and Instagram.
Source: eMarketer
Anyone with teens knows that much more time is spent on TikTok, followed through Snapchat, suggesting that Meta has lost a lot of influence in the social media space. Their platforms are still highly valued for the ability to share images or messages with friends and family, however, the use of the most valuable short video has moved elsewhere.
According to Meta CEO Mark Zuckerberg, on the first quarter 22 earnings call, Reels is already enjoying wonderful good fortune and is winning:
The short video is the most recent version and is uploading very quickly. Reels already account for more than 20% of the time other people spend on Instagram. Overall, videos account for 50% of the time other people spend on Facebook, and reels are also rising rapidly.
The moment is, while we’re experiencing a build on short videos, we’re also seeing a major shift in sources going from being organized almost exclusively through your social chart or tracking chart to now having more of your AI-recommended feed, even if the content wasn’t posted through a friend or you follow.
Truist analysts have just predicted that Meta will overtake TikTok in 18 months. If Meta can effectively compete with TikTok, the numbers would be huge for the company and the stock would collapse. Please note that the company does not monetize video classified ads. very well at this point, despite the fact that users are very attracted to short videos. Meta has a great potential advantage through such monetization.
The biggest complaint about the old Facebook is the far-fetched spending levels the company had decided to earn Metaverse. While Metaverse offers a lot of long-term potential, the industry is not in a position with the lack of fully functional devices on the market. .
Apple is about to launch an AR/VR device, but recent delays have moved the release date to 2023. Either way, the company can now take advantage of the luck of short videos to regain expansion in ad profits given that TikTok generated an estimated $20 billion in profits last year.
Once Meta has made the switch, recent news of a slowdown in hiring engineers provides the truly broad ability to generate profit. Meta Platforms lost $3 billion in the Reality Labs department in the last quarter alone. Halving losses through expanding additional earnings from the launch of Oculus Pro for the holidays and reducing overspending can result in what equates to an additional $0. 50 according to the constant percentage in quarterly earnings. Yes, quarterly earnings.
Due to overspending and questions about advertising profits during the festival and a near recession, analysts have particularly narrowed down EPS’s targets.
Data through YCharts
Metaplatforms are trading at just 12 times the reduced EPS targets of 2023. There are many questions about where EPS targets end up in any weakness in the advertising market. Ultimately, Meta has the ability to reduce prices smoothly and decrease losses in Reality Labs. The department and progress at Reels can generate advertising profits in a weak market.
The main conclusion of investors is that metaplatforms are now priced as a financial hurricane, while the company has many positive levers to increase its profits over time. The luck of short video monetization is the key to inventory in the next two years. years, with relief of burden on the metaverse providing a massive accumulation of profits.
Investors are taking advantage of greater weakness to increase top-tier generation inventories as if the economy were heading for a financial hurricane.
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