Meta records biggest share drop for any US company – ever
By Aryaman Bhatia, Science and Tech Editor, The Pawprint
The shares of Facebook parent Meta plummeted more than 26% on Thursday after poor fourth-quarter earnings and a reduction in daily users highlighted how much the firm relies on social media as it expands its metaverse aspirations.
Meta shares plummeted $85.24 to $237.76 at the closing. The social network’s worth was reduced by over $240 billion as a result of the share price decline. According to Reuters, the decline was the greatest single-day drop in market value for a US corporation ever.
The plunge followed an earnings report on Wednesday in which the business failed profit projections and revealed a quarterly drop in the number of daily active users on Facebook for the first time. Meta also stated that the augmented and virtual reality company at the heart of its metaverse aspirations is lucrative but not profitable.
Meta reported sales of $33.7 billion in the fourth quarter, above analyst projections of $33.4 billion. However, it earned $3.67 per share, falling short of the $3.84 per share predicted by Thomson Reuters analysts polled. Facebook also announced a reduction of almost 1 million daily active members, implying that the social network had reached its pinnacle of growth.
The performance demonstrates how Meta, which was renamed last year as part of a metaverse push, is still reliant on digital advertising on the Facebook social network and its photo site Instagram. Meta is betting its future on the metaverse, a new, immersive version of the internet. The renaming of the corporation generated excitement about the online places where individuals will be able to work and interact as digital avatars.
The company’s metaverse initiative, on the other hand, is in its early phases, and expenditures in it are eating into revenues. Reality Labs, the AR and VR company that houses the Oculus device that will assist underpin the push into the metaverse, made $877 million in revenue but lost $3.3 billion in the fourth quarter.
“While we anticipate Meta to speed up testing advertisements and commerce inside its metaverse products this year, we believe such efforts to be extremely experimental and unlikely to create much income in the short term,” said Debra Aho Williamson, a principal analyst at Insider Intelligence, previously eMarketer.
Meta, like other software companies, has cautioned that Apple’s privacy changes may make it more difficult for businesses to analyze the success of their advertisements on Facebook and Instagram. The business also predicted “headwinds” from inflation and supply chain delays, which would harm advertising expenditures.
Users on Facebook and Instagram are also spending more time on Reels, the platform’s short-form video product that doesn’t produce as much income as the company’s News Feed or Stories, where individuals may submit content that disappears after 24 hours. This is due in part to the fact that Reels has less advertisements than News Feed or Stories.
“I’m certain that leaning more heavily into these trends is the best short-term compromise to make for long-term rewards. We’ve done similar transitions in the past with mobile feed and Stories “In a conference call with analysts on Wednesday, Meta CEO Mark Zuckerberg stated.
Despite the difficulties, Meta continues to pursue its futuristic vision of what it believes will be the successor to the mobile internet.
“If last year was about laying the groundwork for where we’re headed, this year will be about executing,” Zuckerberg said.
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