Can Meta’s Q1 show impact the ‘Metaverse’ theme?

The company reported a revenue of $27.91 billion, with an EPS of $2.72. The company had 2.94 billion active users on a monthly basis, with an average revenue per user (ARPU) of $9.54.

However, its recently created Facebook Reality Labs (FRL), the metaverse division, reported a first quarterly loss of $2.96 billion. The company had announced its earnings earlier this week.

Meta announced that it would be breaking out results for the division to show the performance and investments in a group that it considers key to the next generation of online social experiences.

However, major crypto tokens have not reacted much to Meta’s Q1 numbers. This is peculiar because the markets had dwindled sharply when the company had reported a poor set of numbers for the December quarter.

Anshul Dhir, CoFounder & COO, EasyFi, said one major reason for this is that Meta’s current business is not directly related to cryptos. “In fact, they are winding down the Diem Association which was planning a stablecoin of sorts and rethinking its plan for its own digital currency.”

However, Arijit Mukherjee, Founder and CEO of Yunometa, said that considering the outsize impact of Meta on the metaverse, its Q1 results certainly bode well for the entire crypto space.

“One can expect the current negative trend in the crypto world to reverse to an extent by Meta’s earnings as they are the biggest player in the metaverse arena. But there are other factors that are hurting crypto’s morale,” he added.

FRL generated revenue of $695 million in the first quarter, a small fraction of the $27.2 billion generated in the quarter from Meta’s family of apps, which include Facebook, Instagram and WhatsApp.

Previously, Meta estimated FRL would reduce its overall operating profit by about $10 billion in 2021 and said it was committed to spending even more on the division for the next several years.

What is hurting the sentiments?
The crypto industry is keenly watching global macroeconomic cues such as US Fed rate hikes and China’s rate cuts, along with rising inflation and the war crisis between Russia and Ukraine.

However, one should not see the fall as a result of ‘hurt sentiments’. There is profit booking ongoing in the crypto space amid volatility, said experts.

“This is more of an opportunity actually; on-chain metrics will show that whales are buying this dip,” Mukherjee added. The largest holders are called whales as they hold over $1 million worth of crypto in their wallets.

For Indian investors, the lack of clarity on taxations and the TDS, UPI fiasco with leading banks are factors denting the market sentiments.

“This has led to crypto-assets such as Bitcoin and Ether falling to their Feb-March 2022 levels as the industry tries to ascertain how far and wide the shocks will persist over the next few months,” said Mukherjee.

Should you play the Metaverse theme?
Market participants are swearing by the metaverse theme, with or without Meta.

Although Meta’s investment and impact are sizable, there are many other players who are working on their own metaverse themes, said Mukherjee from Yunometa.

Although Meta’s Q1 earnings are an indication that the metaverse is headed in the right direction and investors need to lap them up while they can, experts said.

“We are seeing a lot of interest and investments in companies that have a strong project idea,” says EasyFi’s Dhir. “It is the blockchain and crypto space that actually gave a boost to the Metaverse concept with an investment of billions of dollars.”