Meta faces historic stock drop after Facebook growth stalls

Shares of Meta Platforms Inc. plunged 24% in premarket trading on Thursday, wiping about $200 billion from its market value after Facebook’s user base faltered last quarter, the first stagnation in the history of the social network.

It was just one bad metric out of several in a terrible earnings report that had many investors wondering if the stock’s best days are behind it.

The company also gave a disappointing sales forecast for the current period, and the CEO mark zuckerberg, who saw his personal wealth potentially plummet to around $24 billion, acknowledged that Goal faces serious competition for user time and attention, particularly from viral video-sharing app TikTok.

The gloomy outlook and stalling user momentum is a dramatic turnaround for a company that has posted earnings of Actions in all but one year since its 2012 IPO, fueling concerns that the flagship product of Goal Platforms and the core ad moneymaker have stalled after years of consistent profits. His one-day market crash can be classified as the worst in the history of the stock market.

“These cuts are deep”, wrote Michael Nathanson, an analyst at brokerage Moffett Nathanson, who titled his note “Facebook: The beginning of the end?” The results were “a headline grabber and not in a good way.”

zuckerberg said that the rival of Goal for TikTok, Reels, is growing fast, but monetization has been slow. He asked investors for patience as the product rises.

“Over time, we think there is potential for a tremendous amount of overall engagement growth” with Reels, he said in a conference call Wednesday. “We think it’s definitely the right thing to do to lean into this and push as hard as possible to farm Reels as fast as possible and not slow down at all, even though it may create slower growth in the short term than we would have wanted.”.

The failures come at a critical juncture for the company, which is waging regulatory battles on multiple fronts and also trying to justify a costly shift in corporate strategy to bet on the metaversethe vision of zuckerberg for an immersive Internet that can take years to realize.

For the better part of a decade, it has seemed Facebook it would never stop growing. Now young users, the future consumers of your advertising, are choosing platforms like TikTok and Google’s YouTube for entertainment and community.

Rarely, if everGoal it has faced so many substantial threats at the same time. In addition to the problems of user growth and intensifying competition, Goal It’s also grappling with a crackdown on targeted advertising by Apple Inc., which said it could cut $10 billion in revenue this year, and cutbacks by advertisers who are cutting budgets because of rising costs. and supply chain disruptions.

The company, which changed its name to Goal last year to indicate his future direction, he also said he will take over the ticker of Actions from GOAL in the first half of the year. The Actions they slumped as low as $246.60 in early trading on Thursday, after closing Wednesday at $323 in New York.

At those levels, it’s the biggest collapse in market value for any American company. But there is no certainty that the losses will continue, especially given the recent volatility that has hit stocks. Actions technological. The markets have swung wildly in recent weeks, with bearish buy traders sometimes breaking in during the closing hours of the trading day.

The Reality Labs division of Goalwhich includes the company’s investments in the metaverse and virtual reality, reported a $3.3 billion operating loss for the fourth quarter, as the company disclosed its contribution for the first time.

On the company call, he was asked zuckerberg when will parts start arriving metaverse For the users. He responded that some aspects, such as digital avatars, are already here. He also reminded analysts that while the metaverse best experienced using a virtual or augmented reality headset, people will still be able to access the digital environment through existing apps from GoalWhat Facebook and Instagram.

Facebook reported 2.91 billion monthly users in the fourth quarter, unchanged from the previous period. Daily active users of the main app in North America, the company’s most lucrative market, decreased slightly from 196 million to 195 million users.

Goal It said revenue in the current period will be $27 billion to $29 billion, compared with $30.3 billion estimated by analysts on average. Changes to Apple’s mobile software that require user permission to collect data for ad tracking are significantly reducing revenue from limited targeted advertising, he said. Goal.

Sales are also being affected because Goal You don’t make as much money from Reels video clips as you do from other products, like News Feed and Stories. Still, executives painted an optimistic picture, saying Reels will one day make as much money as those other products.

Net income in the fourth quarter was $10.3 billion, or $3.67 a share, it said. Goal, below the US$3.84 per share projected by analysts. Revenue was $33.67 billion, compared to the median estimate of $33.43 billion.

Wednesday’s earnings report was the company’s first since changing its corporate name from Facebook at the end of last year. When Goal announced the change, the move was criticized for being a distraction from the many issues regulators have asked Facebook that you solve with your existing networks. But it’s not just about the brand: the resources and talent within Facebook have switched to the new approach. Goal it had said in October that it would see a $10 billion reduction in operating profit for the year due to investments in Reality Labs.

What Bloomberg Intelligence Says:

“The new reality labs segment operating loss disclosure of $10.2 billion for 2021 points to at least a 10 percentage point drag on overall operating margin, which could worsen in the near to medium term.” –Mandeep Singh, Senior BI Technology Industry Analyst

It was also the first financial report since zuckerberg declared that attracting young people, aged 18 to 29, was the company’s new “North Star”. The company hasn’t said how it plans to reveal its progress toward that goal, and there was little shared on Wednesday to address this new push, aside from an increased focus on Reels. Young people in particular have been drawn to apps like ByteDance Ltd.’s TikTok and Snap Inc.’s Snapchat, raising concerns within Goal. That was highlighted by the internal investigation and communications released by whistleblower Frances Haugen last year, a trove of documents known as the Facebook papers.

Goal does not regularly break down users by age. It also doesn’t say how many people use Instagram or the messaging service WhatsApp, or how much revenue those properties generate.

The company makes about 97% of its revenue from advertising on its social platforms. He warned again about the impact of recent changes to Apple’s iOS software for iPhones, which requires companies like Goal ask users for explicit permission to collect data about them. Early estimates show that most users reject this tracking, making targeted advertising the main selling point of Facebook for companies, it is more difficult.

“We believe that the impact of iOS in general is a headwind in our business in 2022, in the order of US $ 10 billion”Chief Financial Officer David Wehner said on the conference call.

Chief Operating Officer Sheryl Sandberg said the Menlo Park, California-based company is working on ways to help advertisers target people with messages that require less personal data.

“There are also many things that small businesses and large businesses can do to take advantage of the many targeting and measurement tools that we have,” Sandberg said on the call.