FlowBank

Meta Verified likely no Game Changer for META stock

What is it? Facebook parent company Meta announced that it is launching a subscription service called Meta Verified.

The service will cost $11.99 per month or $14.99 per month if purchased through the iOS app and comes with additional account features. These include:

  • Account Verification
  • Badges
  • Proactive account protection
  • Access to support
  • Increased visibility and prominence in some areas of the platform

Meta Verified is available through both Instagram and Facebook, although these will be separate subscriptions. The product is currently being tested in Australia and New Zealand.

Why the change?

Subscriptions as a revenue stream are considered to be more consistent and stable than advertising and have become increasingly popular for social networking companies as a means to diversify their revenue streams.

Meta currently makes most of its revenue from advertising which, as we have seen in recent years, can be volatile as it is greatly impacted by the health of the broader economy. Advertising spending is often the first area to be cut back in companies when growth starts to slow. Meta’s ad revenue stream was hit hard at the start of the pandemic and again at the end of last year, amid the rise in inflation and interest rates.

Furthermore, Meta is still adjusting to Apple’s privacy changes which have made it increasingly challenging to target ads at users. This additional headwind has seen Meta suffer more than Alphabet.

Peer comparison

Sector peers SnapChat and Twitter have both launched subscription services in recent months as a way of diversifying revenue streams, with varying success. Twitter’s blue badge subscription reportedly has 300,000 worldwide subscribers. Meanwhile, Snap, which launched Snapchat+ in June last year, now has over 2 million subscribers.

Will it work?

The new subscription service could bolster profitability at the Facebook parent, potentially leading to a rise in the share price.

The risk here is that users won’t want to pay for services that have always been free, which could explain in part why Twitter’s subscription service has been slow to take off.

However, one of the features of Meta Verified -having increased visibility - could be a key selling point, particularly as standing out on social media platforms has become increasingly challenging.

The Meta Verified product appears to cater more to influencers and creators rather than just consumers, offering them a larger audience and increased visibility, which in turn means a bigger revenue opportunity for these creators. As a result, the service could perform better than recent subscriber offerings at sector peers.

Analysts at Bank of America project that Meta Verified could have as many as 12 million subscribers by the end of the year. Meanwhile, analysts at Bloomberg see the service adding $3 billion in revenue, a drop in the ocean compared to last year’s revenue of $117 billion. But the service still doesn’t include business accounts, although there are plans for this going forward. 

The boost Meta needs?

The announcement comes after Meta lost more than $600 billion in market value last year as the share price fell from a $380 peak and after the company reported year-over-year declines in revenue for the past three consecutive quarters.

The new revenue stream isn’t the only change happening at Meta. In the latest set of results, Meta’s Chief Executive Mark Zuckerberg called 2023 the “year of efficiency,” vowing to cut out middle managers and underperforming projects in order to make the firm more nimble and less bloated.

Meta slashed 13% of the workforce at the end of last year and there are rumours circulating that thousands more jobs could be cut imminently.

A new revenue stream combined with recent efforts to be more efficient by cutting costs could help the share price extend its impressive rally across the start of 2023.

Although the outlook is not all rosy, the business does still look slightly confused about its future direction as the company continues to sink millions into the Metaverse.

Broker recommendations

According to MarketBeat, of the 49 analysts rating the stock, 37 gave it a buy rating, 9 a hold rating, and 3 suggest a sell.

The analysts set an average price target of $203.54 for Meta Inc, which equates to an 18.95% upside from the price at the time of writing. The highest price target was $290, and the lowest was $80.

Technical analysis

After dropping to a 7 year low in November, Meta’s share price has since rallied over 90%, rising above its 200 sma for the first time in a year, before running into resistance around $200.

The price has eased back from this recent peak, pulling the RSI out of overbought territory. The 100 sma has crossed above the 100 sma in a bullish signal.

Buyers could look for a rise over $200 to extend the bullish trend towards $225, the May high.

Meanwhile, sellers, encouraged by the bearish crossover on the MACD, and a series of lower lows from the February peak could look for a break below the $150 level, the January high, and the 200 sma, to negate the near-term uptrend. Below here, the 50 sma at 130 could offer some support.

Meta weekly technical chart

Source: TradingView / FlowBank

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