Facebook just announced its name change to Meta to enter the Metaverse when it encountered a crisis. There are reports that Meta is facing many problems. The best days of Meta stock in the current cycle are over.
Meta Platforms is no longer a growth stock. That’s at least the message investors received last week when the parent company of Facebook, Instagram, and WhatsApp released its latest quarterly earnings.
Investors reacted quickly and strongly to the company’s disappointing earnings report. The stock plunged 26% in Thursday’s trading, wiping about $251.3 billion from its market value.
The blow made history for Facebook’s parent company and the market: The sell-off was the worst one-day crash in stock market history and led to the largest loss in market value for a U.S. company ever.
There is some evidence that the current volatile trading environment has played a role in this extreme case, but there is also strong evidence in the report that Meta faces many difficulties, and the best days for Meta stocks in the current cycle are over.
The stock closed at $237.09 on Friday, down about 30 percent this year. During the same period, the Nasdaq 100 fell 10%.
The most disappointing Q4 release: Facebook’s user base stopped growing for the first time. It even shrank in some markets.
According to Facebook, based in Menlo Park, Calif., daily users fell from 1.93 billion to 1.929 billion in the fourth quarter. The news, coupled with lower-than-expected revenue growth forecasts for the current quarter, dented investor confidence and sent the company’s shares tumbling.
Meta said it expects revenue growth to slow as users spend less time on more lucrative services. The agency also blamed inflation that dampened advertiser spending. With these headwinds, Meta can’t offset the impact of changes in Apple’s privacy settings. Apple’s privacy settings that give users the option to stop apps from tracking their internet activity have dented the profitability of companies selling targeted ads, one of Meta’s biggest revenue generators. These changes could cost Meta about $10 billion this year.