Investors on Thursday witnessed the largest selloff of a single stock in a single session in the history of the U.S stock market when shares of Meta Platforms Inc. (formerly known as Facebook) got crushed On Thursday.
The tech titan which has been going through a deluge of scandals saw $252bn wiped out from its value, in a day where about 200 million shares of the stock were traded – ten times more than the usual trading volume of 19million shares. Shares of the company dropped by 26.39% to close at $237.76
Meta’s earnings came in below expectations for the fourth quarter. The company also issued weak guidance saying numerous challenges are ahead in the first quarter. Meta reported earnings per share: $3.67 vs $3.84 expected. Revenue for the quarter came in at $33.67 billion, barely beating the $33.4 billion forecast from Wall Street.
Facebook lost users for the first time. Daily Active Users (DAUs) on the platform were slightly down in the fourth quarter compared to the previous quarter. The deal breaker came as the company issued weak guidance for the coming quarter. Facebook said revenue in the first quarter will be $27 billion to $29 billion, while analysts were expecting sales of $30.15 billion. That would mean 3% to 11% year-over-year growth.
The fall spoiled the brief 5-day comeback for tech stocks which had taken a serious battering after the Fed signaled a March interest rate hike. Tech heavy index fell by as much as 3%, before paring losses from session lows to close at 4,477.44 points (-2.44%)
Meta’s plunge also had a ripple effect in other social media stocks. Shares of Snap (SNAP:NASDAQ) fell by 22%, while Twitter (TWTR:NASDAQ) slipped by 6%. Pinterest (PINS:NASDAQ) shares also experienced a rout, plunging 13%.
The report is Meta’s first since changing the name of its parent company from Facebook, which is a nod to the metaverse. CEO Mark Zuckerberg announced the name change in October following a series of troubling reports about Facebook that stemmed from leaked documents shared by a former employee with journalists, lawmakers, and the Securities and Exchange Commission.
Meta stated that it’s being hit by a combination of factors, including privacy changes to Apple’s iOS and macroeconomic challenges. The company blamed the lower-than-expected growth in part on inflation and supply chain issues that are impacting advertisers’ budgets.
The earnings miss is only the third in the company’s history. In the previous two cases, its stock was punished brutally by investors, but it still rallied back. However, Thursday’s rout seems like the third strike for the stock.
The company has not figured out how to optimize the Metaverse yet. Its expenses on the projects are eating deep into the company’s revenue, leaving investors to wonder how much more the company would have to spend to turn it into a profitable unit. Plus, there are more players with brighter prospects entering the metaverse space.
There’s also a shift to products that don’t generate as much revenue as its core news feed. For example, people are spending more time on its Reels videos which are not monetized.
Meta has long had a dark cloud hanging over it, but investors have been willing to overlook the serial controversies the company has faced over for a long bet on the company’s fundamentals.
Albeit, given the company’s recent poor fiscal performance, weak guidance against the background of antitrust filings, and mounting government regulation, it appears there is not much to be desired about the stock. This gloomy outlook is exacerbated by the company’s questionable corporate value and ethics which arguably prioritizes profit above people.
It seems all the pessimism and growing skepticism of the Facebook a la Metaverse has coalesced into the perfect storm that led to the largest wipeout in the history of the U.S stock market. More importantly, Meta’s rout is perhaps an ominous sign that the dominance of mega tech stocks may be coming to an end.