When the stock market is going through a rough patch, investors often turn to some of its largest companies for clues about the health of the consumer and the strength of the economy, to determine whether a turning point might be near.
That’s certainly the situation in 2022, with both the broad S&P 500 index and the Nasdaq 100 technology index trading in bear market territory.
Social media giant Meta Platforms (META 0.04%) will release its earnings report for the second quarter of 2022 on July 27, and it will be closely followed by global e-commerce leader Amazon (AMZN 1.51%), which reports the very next day. Here’s why investors need to pay attention.
Meta Platforms faces short-term challenges
Meta Platforms owns some of the world’s largest social media networks including Facebook, Instagram, and WhatsApp. Nearly half the planet regularly engages with those brands, as they have a combined 3.64 billion monthly active users. Therefore, Meta’s financial results can clearly signal whether businesses are spending more (or less) money on advertising, which could be indicative of the strength of the economy.
The company is facing growth headwinds because competitors like ByteDance‘s TikTok are increasingly winning attention. That platform has amassed over 1 billion monthly users, and its rapid growth has forced Meta to introduce a new feature on Instagram called Reels. The new feature already accounts for 20% of users’ time spent on Instagram, and how quickly that segment grew in the second quarter will be very telling for Meta’s ability to stave off the threat TikTok poses.
Investors will also be keeping an eye on Meta’s Reality Labs segment, which burned $10 billion in 2021 and a further $2.9 billion in the first quarter of 2022. It’s tasked with building the company’s vision for a virtual world known as the metaverse, which CEO Mark Zuckerberg thinks is the next frontier in social and professional networking. He initially wants to attract 1 billion users to this new-age…
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