Stock market: Facebook group Meta in turbulence: share crashes

Meta shares lost around 20 percent in value on Wednesday. What are the reasons for this and why the drop in prices also offers an opportunity.

The Facebook group Meta disappointed investors with its quarterly figures and cautious growth forecasts, which are atypical for the group. For the first time, the world’s largest online network hardly gained any new users in the past quarter. In addition, the group expects a sales increase of 27 to 29 billion dollars in sales in the current quarter. Analysts assumed more than 30 billion dollars. The stock fell more than 20 percent in after-hours trading on Wednesday.

From an investor’s perspective, however, this can also be a good thing. Because anyone who is familiar with the stock market knows that such price slumps, such as those experienced by the payment service provider PayPal a few days ago, are always accompanied by opportunities. Robert Halver, financial expert at Baader Bank, says: “Only rising share prices mean that I’m buying at higher and higher prices. That can’t be attractive.” Setbacks in the market are therefore an opportunity to increase positions cheaply or even enter the market at low prices. According to Halver, investors do best anyway if they put money into stock savings plans on a regular basis. This is also the opinion of Hendrik Buhrs from Finanztip. Instead of investing in individual stocks, he recommends investing as broadly as possible and recommends a global ETF, for example. Because even well-known companies can have disappointing share prices for years, according to the financial expert.

Price slump in the meta share: That’s behind it

Back to the meta group: where exactly did the stock slump come from? Founder and boss Mark Zuckerberg expressly referred to competition from the video app Tiktok, among others. “People have a lot of choices about how they spend their time – and apps like Tiktok are growing very quickly,” he said in a conference call with analysts. The 37-year-old set the direction for his platform to focus even more on short videos from now on. The group developed its own Tiktok counter Reels for this purpose.

The new focus will initially put pressure on the proceeds, admitted Zuckerberg one. Because Reels ads are less lucrative than, for example, the space in the users’ news feed. But this is the right step for the platform in the long run. Facebook are starting to catch up from an awkward position, warned Forrester Research analyst Mike Proulx. The group not only has to win back young users, but also learn to make better money with the Reels videos. “Simply copying Tiktok’s features will not do.”

However, the abrupt brake on activity hit all areas. A decline in the number of daily active users from 1.93 to 1.929 billion seems negligible at first. In the previous quarter, however, the value had increased by 22 million – and by 30 million in the second quarter of 2021. Facebook also missed the expectations of the analysts, who had assumed 1.95 billion daily active users. The Facebook group Meta also counts how many users use at least one of its apps – including WhatsApp and Instagram. With an increase of ten million to 2.82 billion daily, growth was also unusually low here. In the previous quarter, 50 million had been added.

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Apple measures are slowing down Meta’s core business model

During the corona pandemic, Facebook spoiled investors with lavish growth rates. Therefore, the forecast of 27 to 29 billion dollars in sales in the current quarter hit particularly hard. Because it means that year-over-year revenue may only grow by a paltry 3 percent. As justification, the group once again referred to Apple’s measures for more privacy on the iPhone, which have been slowing down Facebook business for months. CFO Dave Wehner said Meta expects that this will push consolidated sales by $10 billion this year.

In the past few months, Facebook had been hit by Apple’s measures for more privacy on the iPhone, among other things. App providers like Facebook have had to ask users since last year if they can track their behavior across different services and websites for advertising purposes. Very many iPhone customers rejected this. This makes it difficult for Facebook to tailor ads to individual users, its central business model.

Virtual Reality: The Future of the Meta Corporation

Meta also released more detailed figures on its virtual reality business for the first time. Over time, this should create the digital world Metaverse, in which Zuckerberg sees the distant future of the group. In the most recent quarter, Reality Labs revenue increased to $837 million from $717 million year over year. At the same time, the operating loss rose from around 2.1 to 3.3 billion dollars.

Meanwhile, consolidated sales grew by a fifth year-on-year in the past quarter to just under $33.7 billion (around €29.8 billion). The bottom line is that profits fell by eight percent to almost 10.3 billion dollars. (somax, dpa)

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