Meta’s Resurgence Has Little to Do With the Metaverse

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    Meta’s stock surged 15% last Thursday after reporting sales and profits that easily beat analyst estimates, but Meta’s resurgence has little to do with the Metaverse.

    The stock has risen nearly 100% since the beginning of the year, and has risen a whopping 170% since its November low.

    The Telecom Services Select Sector SPDR Fund (XLC), which holds a fifth of the portfolio, is up 24%, while the Global X Social Media ETF (SOCL), which holds 12% of the portfolio, is up. Positioned 13% and 6.7% by name, the Roundhill Ball Metaverse UCITS ETF (METV) is up 24%.

    Meta’s phenomenal comeback has outperformed many ETFs holding very large positions in equities this year.

    After a year-on-year decline of three-quarters, the company’s revenue grew 2.6% on higher engagement with its app and an improved digital advertising landscape.

    Meta CEO Mark Zuckerberg said more than 3 billion people use at least one of the company’s apps, mostly Facebook, Instagram or WhatsApp.

    Reels, the company’s short-form video product within Instagram and Facebook, “has increased engagement across the app,” said Zuckerberg, giving Reels market share in short-form video over competitors such as TikTok. I pointed out that I believe

    According to the company, more app engagement and a healthier advertising environment should accelerate revenue in the next quarter.

    For 2Q, Meta led revenue growth of about 7%.

    Meanwhile, significant cost reductions, including three layoffs, have improved Meta’s profitability.

    Analysts estimate that earnings per share were lower in the first quarter than in the same period last year, but by next year the company could generate record or near-record profits.

    It is these factors, and Meta’s increasing focus on artificial intelligence, that are driving investor enthusiasm for Meta stock and the ETFs that hold it.

    Zuckerberg said Meta has two main areas of AI. One is the recommendation AI that powers the company’s apps and ads.

    The second is generative AI, a technology that powers viral applications such as ChatGPT and Midjourney.

    Zuckerberg said generative AI will power “a whole new class of products and experiences.”

    never give up

    Still, despite Meta’s growing interest in profitability and artificial intelligence, the company hasn’t abandoned the Metaverse. Zuckerberg said, “I’d like to say up front that that’s not accurate, as talk has been unfolding that it’s somehow moved away from focusing on the Metaverse vision.

    “For years, we have focused on both AI and the metaverse, and we will continue to focus on both.”

    He said AI will help the Metaverse reach its full potential.

    “Breakthroughs in computer vision have allowed us to ship the first standalone VR device. Mixed reality builds on a stack of AI technologies for understanding the physical world and merging it with digital objects. It’s been done,” added Zuckerberg.

    “The ability to procedurally generate worlds is critical to delivering engaging experiences at scale. Even as Zuckerberg remained bullish on the Metaverse, Meta’s first-quarter earnings report highlighted that the company was far from bringing the Metaverse to the masses. .

    Meta’s “reality lab” segment, which houses the Metaverse operation, had revenues of just $339 million in the first quarter, down 51% year-over-year due to lower sales of the Quest 2 virtual reality headset.

    The segment also suffered an operating loss of $4 billion.

    Investors were less forgiving of these big losses in 2022, but this year, thanks to a slightly improved advertising landscape and Meta’s focus on profits and AI, investment The house seems to be trying to get over them.

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