Trading Day – Meta crashes

Meta shares crashed nearly 20% in after-hours trading as it plans to burn even more money building the metaverse despite weak earnings.

The stock is down more than 65% from its peak and has wiped out more than five years of strong growth.

US markets turned negative yesterday, as the S&P 500 closed 0.7% lower and the Nasdaq fell 2%.

The Nikkei 225 followed in their footsteps and is down 0.3% in early morning trade, while the Hang Seng continued the rebound of its extreme lows and climbed 2.1%.

In local news, AB InBev’s earnings remained flat despite a healthy increase in revenue.

Afrimat reported a decline in earnings due to a downturn in iron ore prices, but the company remains resilient with good growth in production.

Here is the biggest news of the day.

• Meta shares crashed nearly 20% in after-hours trading as it plans to burn even more money building the metaverse despite weak earnings. The stock is down more than 65% from its peak in late 2021 and has wiped out more than five years of growth. Earnings per share came in at $1.64 compared to analyst estimates of $1.89. Revenue declined for the second consecutive quarter to $27.7 billion, while its net profit plummeted 52% from a year ago to $4.4 billion. Shareholders are unhappy with the amount of money being burned in the development of the metaverse. While revenue is falling and operating margins declined from 36% to 20%, the company’s expenses rose 19% to over $22 billion. The company’s Reality Labs division, which houses its VR headsets, lost over $9 billion in the first three quarters and Meta expects these losses to grow significantly in 2023.

• AB InBev earnings remain flat despite a healthy increase in revenue. Earnings per share (EPS) for the third quarter came in at $0.84, roughly the same as last year. The underlying profit was $1.68 billion. Revenue grew 12.1% while total sales volume grew 3.7%.

• Afrimat reports a decline in earnings due to a downturn in iron ore prices, but the company remains resilient. Headline earnings per share declined by 14.5% to R2.52, despite revenue increasing by 7.2% to R2.6 billion. The group’s operating margin declined from 24.1% to 19.7%. It still maintains a strong balance sheet and cash flows. It has a net cash balance of R770 million and generated net cash from operating activities amounting to R784 million. The Jenkins iron ore mine was successfully commissioned and contributed to a 21.9% increase in sales volumes. Afrimat declared an interim dividend of R0.40 per share.

• EOH shows a good recovery but is still making a loss. The company has managed to shrink the loss per share (LPS) from R1.66 in the previous year to R0.15. However, the previous year included once-off items. The headline loss per share was only R0.22 in the previous year and was reduced by 18% to R0.18, a much smaller improvement. Revenue from continuing operations also declined by 7% to R6.03 billion. The group has managed to create more certainty surrounding its liquidity and debt by refinancing it into a R500 million 3-year term senior facility and a bridge facility with R728 million currently outstanding, repayable on 31 December 2023. However, liquidity remains challenging as EOH only has a net cash balance of R459 million. EOH did manage to repay R733 million during the previous year.

• Bank of Canada increased interest rates by less than expected. The bank announced only a 0.50% increase to 3.75%