But this season has served as a reminder of how many traders who have piled into fast-growing tech stocks have come to value another metric. They’re obsessed with scale, as measured by the number of users and subscribers.
That’s partially due to just how low expectations had failed for the social media platform. Its previous batch of results was so disastrous that it caused the stock to crater 26%, leading to the biggest loss in market value for an S&P 500 company on record.
Yet there’s also significant relief about Meta’s user numbers, which had been stagnating. While they were slightly lower than Wall Street expected, they did grow during the first three months of the year.
“Meta’s results were very well received, all things considered,” Laura Hoy, an equity analyst at Hargreaves Lansdown, told me. “A lot of that was based on the user number growth that posted.”
Monthly active Facebook users were up 3% year-over-year, while daily active Facebook users grew 4%. Monthly and daily active users on Meta’s family of apps, which includes Instagram and WhatsApp, each grew 6%.
These numbers are important to both companies for slightly different reasons.
Since Netflix doesn’t run ads — at least not yet — subscription fees are its main source of revenue.
But scale is also essential to justifying these companies’ super-rich valuations. One year ago, Facebook was trading at more than 30 times earnings from the past 12 months. As recently as October, Netflix was trading at almost 70 times earnings.
A big factor: The promise that these companies would be able to tap their massive user bases to make more money in the future. When growth slows significantly, that undermines the investment proposition in a better way.
“Investors have gotten used to seeing huge user number growth figures,” Hoy said. “And as that calms down, it begs the question of whether these valuations which have gotten so large over the last few years are worth it.”
That’s especially true given the current scrutiny on tech firms, which look less appealing as interest rates start to rise. Wall Street has been taking a good look at whether it got too excited about Big Tech names during the pandemic.
Watch this space: Meta didn’t bleed users last quarter like Netflix. But other numbers underscore its tough path ahead as it battles rivals like TikTok, struggles to monetize popular video content and deals with the disruption of its core advertising business because of changes to Apple’s privacy practices.
Mark Zuckerberg’s company posted its slowest revenue growth in years and said its profit was down 21% compared to a year ago. But investors are ignoring these developments, at least for now.
Palm oil is in half your groceries. Its price could dream
Indonesia is starting to restrict exports of palm oil — a move that could make the global food crisis worse and push up the prices of hundreds of consumer products.
The country suspended exports of cooking oil and the raw materials used to make it on Thursday in a bid to secure local supplies, my CNN Business colleague Michelle Toh reports.
The Southeast Asian country is the world’s largest producer of palm oil, a common ingredient found in many of the world’s food, cosmetics and household items. WWF estimates that it’s used in nearly 50% of all packaged products in supermarkets.
The surprise announcement last week sent prices of the commodity soaring. Crude palm oil futures in Malaysia, a global benchmark, jumped nearly 7%.
Now the market is racing to digest the impact. The regulation, signed on Wednesday, is broad in scope, according to analysts at Goldman Sachs. While there was some speculation it could be more limited, it ultimately is likely to cover about 90% of all Indonesia’s palm oil exports, they said.
Palm oil prices were already under pressure after Russia’s invasion of Ukraine, as markets scrambled to find alternatives to shipments of sunflower oil stuck in Black Sea ports.
Indonesia’s export ban could make the situation worse. James Fry, chairman of consultancy LMC International, said the price of items such as cooking oil, instant noodles, snacks, baked goods and margarine could rise as a result.
“We’ve got the perfect storm,” he said. Droughts in South America and Canada have also constrained supplies of soybean oil and canola oil, he added.
On the radar: One outstanding question is how long Indonesia’s ban will last. It’s in place “until further notice.”
Why the Japanese yen is at a 20-year low
Japan’s yen hasn’t been this weak in 20 years, rattling foreign exchange markets as investors race to determine just how far the currency could fall.
The latest: The Japanese yen dropped sharply after the Bank of Japan’s meeting on Thursday. It was last trading at more than 130 versus the US dollar, its worst level since 2002. The currency has plunged more than 13% against the dollar since the start of the year.
The divergence has been fed by a difference in central bank strategy. The Federal Reserve is in the process of pulling back support for the economy to fight the highest inflation in decades. But the Bank of Japan has a different plan.
When the BOJ met on Thursday, it “clearly indicated that it is not ready to end its easing policy as its inflation target is still far away,” according to Min Joo Kang, a senior economist at ING.
The bank intends to keep the money taps on until it sees sustained inflation near 2%, Governor Haruhiko Kuroda said. Deflation, or falling prices, also poses problems for growth. Consumer price inflation in Japan rose 1.2% for the year ending in March, compared to 8.5% in the United States.
But if the yen keeps losing ground, it could drive up the cost of living for people in the world’s third largest economy by making it more expensive for businesses and consumers to purchase imported goods. That could impede Japan’s recovery from the coronavirus pandemic.
“Yen weakness, at this point, constitutes a material drag on economic activity, by eroding disposable incomes and pushing up costs for firms,” Pantheon Macroeconomics’s Craig Botham told clients.
Also today: The first look at US GDP for the first three months of the year arrives at 8:30 am ET.
Coming tomorrow: The latest reading of the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures Price Index.