Facebook had a market cap of $1 trillion a year ago, putting it in rarefied territory with a few U.S. technology giants.
The view is not the same today. Meta has lost more than half of its value. The stock is about to close out its third straight quarter of double-digit percentage losses and is currently trading at its lowest point in over a year. Four stocks in the S&P 500 are not doing well.
Users brought their friends and family members, who told their colleagues, who invited their friends. Everyone was in a single place. The capital to recruit the best and brightest engineers came from the company's profits.
The cycle has turned around. Meta is poised to report a second straight drop in revenue because users are jumping ship and advertisers are cutting spending. The social login button on Facebook is no longer used by businesses. It is an emerging challenge as founder and CEO Mark Zuckerberg spends a lot of his time proselytizing the metaverse, which may be the company's future but is costing billions of dollars a year to build.
Within the next decade, the metaverse will reach a billion people and host hundreds of billions of dollars of digital commerce, according to Facebook's founder and CEO. He told Jim Cramer in June that the "North Star" is to reach those kinds of figures by the end of the decade and create a massive economy around digital goods.
The way investors are dumping the stock has some wondering if the downward pressure is actually a death spiral for Meta.
Laura Martin is the only analyst who has a sell rating on the stock.
There is no suggestion that Facebook is about to go out of business. The company's business model is one of the most profitable on the planet. Meta ended the quarter with over $40 billion in cash and marketable securities despite a drop in net income.
It is no longer a growth story for Facebook. That is the only thing that has been known. The company had its lowest revenue growth in the year of 2020. Revenue is predicted to fall this year by analysts.
In the second quarter of this year, the number of daily active users in the U.S. and Canada fell to 199 million from 202 million in the first quarter of the year. According to FactSet estimates, user numbers are expected to increase 3% a year over the course of the next ten years.
Jeremy Bondy, CEO of Liftoff, said that he was worried that they were not winning the next generation.
For the first half of the year, sales are expected to grow in the single digits. Even that bet is risky. Bondy says that the next generation is moving over to TikTok, where they can create and view short, viral videos instead of scrolling past political rants from distant relatives.
Meta has been trying to duplicate the success of TikTok with its short video offering called Reels. Bondy theorizes that the company will likely get a lot of revenue from the increase in the amount of recommended short videos on the social network.
It is not known how well the format works for advertisers. The business of TikTok is owned by China's Byte Dance.
In her last earnings call as COO, she said that videos are harder to measure than photos and that Facebook has to show businesses how to use the ad tools for reels.
It is very promising, but we have some hard work ahead of us.
Skeptics like Martin think that Facebook is pushing users away from the core news feed, where it makes tons of cash, and towards Reels, where the model is unknown. It's important that the business is headed in the right direction.
If the core business wasn't strong enough to stand alone, he wouldn't be hurting its revenue at the same time. He must think he has to move his audience to compete with TikTok.
A Facebook spokesman wouldn't speak to the story.
There is at least one major reason for concern that is related to Apple.
The app tracking transparency update undermined Facebook's ability to target users with ads, costing the company $10 billion in revenue this year Artificial intelligence-powered advertising is supposed to make up for Apple's changes.
It may be less than a band-aid. Chris has seen the rise and fall of social networks as trends change. That is not a problem that can be solved with the use of artificial intelligence.
I was there when it was a thing and I am old enough to remember it. The social networks are switchable.
The company is not in a good position when it comes to user numbers.
The last time Facebook's market cap was this low was early in the year of 2019. The documents leaked last year by a former employee of Facebook have hurt the company's reputation.
Facebook knew of many of the harms its products caused kids and was unwilling or unable to do anything about them. The company was compared to Big Tobacco by some US senators.
Former Facebook employee and whistleblower Frances Haugen testifies during a Senate Committee on Commerce, Science, and Transportation hearing entitled ‘Protecting Kids Online: Testimony from a Facebook Whistleblower’ on Capitol Hill, in Washington, U.S., October 5, 2021.According to the author of brand-building books, there isn't much evidence to suggest that Facebook's change to Meta has changed public perception.
The company still suffers from a lot of skepticism about whether they are a force for good or bad.
It is possible to rehabilitate a damaged brand. Domino's Pizza came back from a crisis in 2009. In April of that year, a video made as a prank by two restaurant employees wentviral, showing one of them doing disgusting acts with food while cooking in one of the company's kitchens. Two employees were charged with food poisoning.
Domino's launched a marketing campaign called the "Pizza Turnaround." In the first quarter of 2010, the stock increased in value.
According to Yohn, the company is going to make substantive changes to what they are offering and changing people's perception. They actually did change, even though it sounded like just marketing.
She said that he isn't coming across as a leader who is serious about changing his culture and about changing himself and about creating a company that will be able to step into the future that he's imagining.
A decade ago, there was no better place to find a hotshot engineer than Meta.
A former Facebook ad executive told CNBC that even though TikTok is owned by a Chinese parent, it has an edge over Meta when it comes to recruiting because it is seen as having less moral downside.
An increasing number of students in the computer science department at the University of Chicago are interested in working for TikTok and ByteDance, according to Ben Zhao, a computer science professor.
As a result of how the market has punished tech stocks this year, Meta and Google are having to pay more and give out more lucrative stock options and packages.
Jake Dollarhide is the CEO of Longbow Asset Management in Oklahoma.
After the 2012 IPO of Facebook, investors ran from the company because of its inability to move from the PC to the mobile world. The stock of Facebook was off to a great start.
Dollarhide is confident that Meta can cash in on its bet-the-farm move to the metaverse as a result of Facebook's success. In the second quarter, Meta's Reality Labs division generated $450 million in revenue and lost $2.8 billion.
Dollarhide said, "I think he is very ambitious." I wouldn't bet against him just as I wouldn't bet against him.
Dollarhide doesn't own Facebook shares anymore, preferring tech companies like Apple and Amazon.
Meta can be seen as a value company and not a growth company according to Dollarhide.
The future of the company is in the metaverse, where he is banking on new businesses forming around virtual reality, regardless of what happens in the next year or two.
There is a lot of uncertainty around the metaverse.
Are daily users prepared for the metaverse yet? The person said, "Zambo said." The underlying technology is mature enough to make the transition seamless. That may not be up to Facebook or Meta at the moment.
Meta's stock price from the depths of the decade may look like the discount of the decade if the predictions are correct. Predicting of a death spiral will be made fun of like a 2012 cover story from Barron's, with a thumb pointing down. It was trading around $130 four years later.
Martin is a meta skeptic.
All Rights Reserved © 2024
