Facebook, now Meta is the company that everyone loves to hate. With that in mind, it’s easy to see why the events of Thursday, 03 Feb, came with such great joy to a lot of people. Meta’s market cap fell by 26% in one day, erasing 240 billion dollars of value, 25% in one day. This was the biggest single-day market cap drop in history for a US publicly-traded company. Mark Zuckerberg personally lost 29 billion dollars in the collapse. So what caused this massive fall of Meta? And what does this signal for the company?
Let’s talk about this topic in today’s article. We publish this type of article every day. So make sure you turn on the notifications to get updates about new articles!!
Table of Contents
Why did this happen with Meta?
So why did the stock fall so much? Or simply put the Facebook platform is losing popularity? Back in 2018 younger Americans and Europeans began to leave the platform droves. Back then that was still okay for Facebook’s bottom line because the developing market update was growing at a much faster rate than Western markets for leaving. In an earnings report yesterday, the company stated that for the first time in its history, the Facebook Social network platform was losing daily users overall. The Facebook platforms Indian, African, and Latin American markets now bleeding users. The platform may have reached peak saturation. Young people in developing markets now go straight to TikTok and in Western markets, Facebook is now seemingly a destination for old people. Everyone else mainly uses it for messenger, groups, and events.
The main Facebook wall were most of the advertising takes place isn’t exactly why people log on anymore. Apple’s move to make ad tracking more difficult has also hurt Facebook’s bottom line. The Facebook business model is advertising-driven after all.
In short, Meta wasn’t going to be making as much money from Facebook as they forecast. This news surprised the markets. If you know anything about trading markets, absolutely hate surprises. And from there we saw the biggest wipeout in history.
Is Meta losing popularity?
Facebook losing popularity isn’t the only reason for the fall. The whole Meta company is going through a lot of controversies. There has been major pressure on Meta from regulators and other government bodies. After the harm that Instagram and Facebook causes the team was exposed over and over again by various whistleblowers.
To add this the Metaverse ventures have already lost the company 8.3 billion dollars and yesterday was revealed the Oculus Quest Headset had lost 3.3 billion dollars in one quarter despite revenues reaching 900 million. By the way, if you don’t know what Metaverse is, then you must read -> https://techwithandy.online/metaverse-what-is-metaverse-metaverse-technology-metaverse-stock-metaverse-news/
It’s likely that investors would like to see some results from a venture into the Metaverse sooner rather than later. And it’s not like there’s no money to be made. Real estate in the Metaverse exceeded 500 million last year and it’s expected to double this year. To succeed here, Meta needs a big slice of the growing pie.
In addition to this, growth and risk stocks may have had the time in the sun. Overall, the US economy isn’t looking too great. The country just crossed the 30 trillion dollars in debt and may dip into recession with the Atlanta Fed predicting GDP growth next quarter of 0.1%. Inflation is rising to record highs. 17% of GDP last quarter was companies simply hoarding stock inventory in fears of inflation. People are quitting their jobs on mass and bank interest rates are rising. Many investors are asking yourself, does this seem like a great time to be put in my money in speculative tech stock place? For now the answer still will be yes. But in a couple of years investors may look elsewhere for safer returns.
Is this the end of Meta?
So is this the end of Meta? Hardly. Other Meta sub-brands like WhatsApp and Instagram are still adding users. Meta also plans to focus on its short video format, reels to bring in more users and generate revenue. This recent crash of Meta was most likely just a stock market overreaction. And the stock will probably bounce back at no time. But if the company keeps on missing earnings targets, things may play out differently. After all, just back in June of last year, Meta was worth one trillion dollars, and now its down 35%. But ultimately it’s way too early to tell what this could mean.
Conclusion
The real question is now what will happen in the next few years? Will Meta be able to recover this massive loss in upcoming years and will it be able to pivot into the Metaverse? Is it able to compete with Tiktok, is it able to actually lean into the video the way Mark Zuckerberg wants it to? There are a lot of questions arising right now. But we cannot say anything at the moment. We can just wait and see.
So what do you guys think about this? Do you see this as just a blip on the road? Or do you think that this might be something bigger, a sign of things to come from Meta? Do you think that this crash being the biggest single-day value loss in history, might tell us something?
Let me know your thoughts in the comment section below. You can also ask your questions/doubts related to this topic in the comment section. I would happy to answer them all.
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