Meta Platforms, Inc. (NASDAQ: FB ) stock continues to trade at a very low valuation multiple and hasn't seen any improvement after a sudden correction during the last earnings call. Lower forward-looking revenue growth expectations were a key factor driving the stock lower.
Another major reason is the decline in daily active users, or DAUs. This is the first time Facebook has seen a drop in DAU, which is seen as a sign that customers are leaving the platform. However, a closer look at this metric reveals that DAUs in the US and Europe have stabilized for several quarters. The recent decline in DAU was primarily due to a decline in the "Rest of World" geographic region.
Most international regions have reached saturation in terms of mobile connections, which will limit Facebook's ability to acquire more users. Facebook's next phase will depend entirely on its ability to increase monetization per user. New initiatives such as payments and social e-commerce will be key drivers of future revenue growth. In the coming quarters, investors should pay more attention to the trend of ARPU instead of DAU.
Are DAUs redundant?
DAU and MAU are Facebook's most-cited metrics over the past decade, as the company quickly gained new users. More users directly correlates to future growth potential. However, it is clear that the growth of this metric is limited by the headcount.
DAUs in the US and Europe reached saturation levels a few quarters ago. Most of the growth in this metric was driven by new users in Asia Pacific and the rest of the world. Even in these regions, the number of people connected to the Internet has reached saturation. we can connect ubiquitously from the internet