Meta Platforms Inc. and its Battle with Apple Inc.
Discover the ongoing battle between Meta Platforms Inc. and Apple Inc. in the mixed-reality headset market and how it affects both companies. Despite the clash, Meta continues to rely on strong ad sales and diversification into augmented reality, vir...
Troy D. Hanson
October 24, 2023
Meta Platforms Inc. finds itself in a quandary due to its ongoing conflict with Apple Inc. However, this issue does not stem from any changes made to the iOS system by Apple, which made it more challenging for Meta to gather personal data about consumers. This change, implemented in 2021, resulted in a significant loss of potential advertising revenue for Meta. Instead, the clash between these tech giants arises from their competition in the mixed-reality headset market. In fact, a Meta employee went so far as to describe the situation as Meta being in the "afraid of Apple stage," according to Bloomberg News.
This impending collision in the mixed-reality headset industry poses a long-term challenge for Meta. Despite this, Meta can still rely on strong ad sales during this time, thanks to its gradual diversification into augmented reality, virtual reality, artificial intelligence, and the metaverse.
The strained relationship between these Silicon Valley powerhouses is nothing new. Apple has consistently criticized Meta for its privacy policies while Meta has pointed fingers at Apple for its closed product ecosystem.
Although Meta changed its corporate name from Facebook two years ago to emphasize its focus on the metaverse, virtual reality remains a relatively small part of the social-media giant's overall financial picture. The majority of Meta's revenue still comes from advertising. In fact, experts predict that Meta will continue to generate substantial ad revenue and solidify its position as the second-largest tech player, just behind Alphabet Inc.'s Google.
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Third-Quarter Revenue Beat Expected
On Wednesday afternoon, Meta is set to report its third-quarter results, and Jefferies analyst Brent Thill anticipates a revenue beat. Thill believes that Meta's outlook for the fourth quarter will indicate a reacceleration in revenue growth compared to the same period last year.
Anticipated Growth in Ad Revenue
TD Cowen analyst John Blackledge predicts a significant spike of 25% year-over-year in Meta's ad growth for the third quarter. Furthermore, Blackledge expects this growth to continue through 2024, driven by increasing engagement and monetization of "Reels," a popular feature on the platform. Additionally, attention is drawn to Meta's cost outlook for 2024 as the company prioritizes efficiency.
Generative-AI Consumer App Push
UBS analyst Lloyd Walmsley believes that Meta's push toward generative-AI consumer apps is currently undervalued by the market and not yet priced into shares. This emphasis on artificial intelligence technology may further contribute to Meta's future success.
Strong Digital-Ad Performance Expected
Despite prevailing macroeconomic uncertainties, Wedbush Securities analyst Scott Devitt expects both Meta and other major players in the digital-ad industry, such as Google and Snap Inc., to deliver strong performance in the second half of 2023.
Impressive Stock Rally
Meta experienced a notable achievement on October 11th, with its stock closing at $327.82—its highest level in over a year. This milestone was reached amidst an overall positive October market rally.