2021 was a frenzied and glamorous year for the US stock market. The three major indexes rose for three years in a row. The S & P 500 index rose 26.9% in 2021, reaching 70 new highs. Inflows into the stock market exceeded $10 billion for the first time, and the turnover of US stocks reached a record $10.3 billion in 2021. The performance of American technology stocks represented by FANNMG is particularly eye-catching, and it has become an important factor in promoting the Nasdaq, making the entire US stock market booming.

However, this situation reversed in 2022, and since the beginning of 2022, with the implementation of the Fed's monetary tightening policy, it has affected investors' interest rate expectations, the instability of the superimposed international environment has intensified the volatility of the stock market, and the US market has plummeted. Three major indexes have tumbled one after another, and large US technology stocks have suffered the biggest sell-off in a decade.

Us technology stocks experienced difficult times, Meta fell at the top of the decline

As of April 26, 2022, the Nasdaq Index has fallen 21% this year; the S & P 500 Index has fallen 13%; by Meta platform Inc., Apple Inc (Apple Inc.), Amazon.Com Inc (Amazon.com Inc.), Netflix Inc., Microsoft Corp (Microsoft Corp.) And Alphabet Inc. The "FAANMG" index is down 17%. The FAANMG currently accounts for 23.8% of the s & p 500 by market capitalization.

Specifically, as of April 27, among FAANMG's top six technology stocks, Netflix Inc (NFLX) had fallen by 67% year-to-date; Facebook's parent company Meta platform Inc. (META) is down 46%; Microsoft Corp (MSFT) is down 20%; Alphabet Inc-CL C (GOOGL) is 18%; Amazon.Com Inc (AMZN) is down 16%; and Apple Inc (AAPL) is down 12%.

Meta platform is the youngest company in the FAANMG index, but experienced almost the same fate as Netflix Inc in 2022, and its share price has nearly halved since the beginning of the year. After the release of Netflix Inc's first-quarter results, its share price was dealt another blow because the number of global net paying users decreased by 200000 in the first quarter, nearly 3 million less than the 2.73 million expected by the market.

According to the previously released 2021 annual report, Facebook, as an established social media, also faces the problem of slowing user growth, and some markets have even shrunk. The market questioned Facebook Inc's growth, and its share price was once sold off. At the same time, Facebook Inc changed his name to Meta in 2021, that is to say, meta-universe will become the strategic focus of the next phase of Meta, and Meta believes that it can develop related new technologies and become a leader in the meta-universe industry. Meta's bet on meta-universe gives investors new expectations for the future of the company.

On April 28th, Meta released its financial results for the first quarter of 2022. What is the development of Meta Universe's business? Can it meet the expectations of investors? Can the problem of slowing user growth be improved in the first quarter?

Meta income growth rate innovation is low, net profit growth is negative

Let's take a look at the company's overall revenue. In the first quarter of 2022, Meta realized revenue of $27.9 billion, up 6.64% from a year earlier. Before the first half of 2021, the relatively serious stage of the epidemic brought a large amount of user traffic to Meta, stimulated the related business demand, and ushered in a higher year-on-year growth rate of income. But with the epidemic alleviating, the company's revenue growth has slowed significantly for four consecutive quarters, with a year-on-year growth rate of 6.64% this quarter, the lowest in Meta in nearly a decade.

Meta's main source of revenue is advertising, which accounts for more than 95% of the company's total revenue. Meta's advertising revenue in the first quarter was $27 billion, and year-on-year growth has slowed to 6 per cent.

(source: company financial report)

The performance of Meta's net profit is also not satisfactory, with net profit of 7.4 billion yuan in the first quarter, down 21.4% from the same period last year. The company's net profit trend is roughly the same as revenue, with a significant decline in growth for four consecutive quarters, which has been negative for two quarters compared with the same period last year, and the decline has expanded. The world's largest social software seems to have reached a bottleneck in performance growth, with revenue and profitability falling sharply.

The declining trend of user growth remains unchanged, and the business of metacosmos is losing money.

Let's take a look at the company's user indicators. In the first quarter, the average number of daily active users (DAUs) of Meta was 1.96 billion, an increase of 4% year-on-year and the same as the previous quarter. The number of daily active users stagnated month-on-month in the four seasons of last year and resumed growth in this quarter. In terms of monthly active users (MAUs), the MAU of Meta in the first quarter was 2.94 billion, up 3% from 2.85 billion in the first quarter of 2021 compared with the same period last year. But in terms of year-on-year growth, both MAU and DAU showed a very obvious downward trend, and user growth in individual quarters could not confirm the long-term growth trend of MAU in the future.

It is clear that the short-term surge in traffic to Meta during the outbreak does not change the fact that the company is experiencing bottlenecks in growth and that user traffic is gradually peaking. Meta announced its name change to meta last year, perhaps because it was aware of the company's current growth difficulties and wanted to make breakthroughs in new areas, while betting that Metasverse might find a whole new way out for the company.

The company mentioned in its financial report that the technology built by Meta can help people connect, find communities and grow their business. When Meta was launched in 2004, it changed the way people contacted. Applications such as Messenger, Instagram and WhatsApp further support billions of people around the world. Now, Meta is moving beyond 2D screens to immersive experiences such as augmented reality and virtual reality to help build the next development of social technology.

However, from the company's disclosure of the meta-universe business, the revenue is not optimistic. Revenue from Meta's AR and VR-related hardware, software and content, the meta-universe related revenue reality lab (Reality Labs), was $695 million in the first quarter, down 20.7% from $877 million in the fourth quarter of last year. Reality lab recorded a loss of $2.96 billion in the first quarter.

Overall, Facebook Inc's performance in the first quarter was not satisfactory, with low innovation in income growth and negative year-on-year growth in net profit. Although user indicators resumed growth, it was difficult to change the fact that user growth declined as a whole. Global social giants are going through tough times, and it's not clear whether meta-universe will bring new growth to the company. To be sure, Meta will experience a more severe test in 2022 than in 2021. It is not realistic for Meta to turn around on meta-universe in the short term. On the contrary, the increase in business spending and investment in meta-universe will put more pressure on the company's performance.