‘Train Wreck:’ Wall Street Slaps Facebook After Market Value Falls by $700 Billion
Facebook (now known as Meta) has suffered a $700 billion drop in market value since its peak high of more than $1 trillion in September 2021. One analyst labeled the company’s dismal earnings and future strategy a “train wreck.”
CBS News reports that Facebook has taken a huge risk in its pivot towards a virtual reality metaverse in the last year, a move that does not appear to be working out well for the Masters of the Universe.
Facebook shares have continued their downward trend throughout 2022, plunging by more than 24 percent in morning trading on Thursday following a weak forecast for the fourth quarter that came with third-quarter earnings well below Wall Street’s expected earnings.
Facebook is facing a number of issues currently, such as a slowdown in online ad spending, negative effects of Apple’s iOS 14 App Tracking Transparency feature, and increased competition from other platforms such as the Chinese-owned video app TikTok. This has resulted in the company posting consecutive quarters of revenue declines, with a third straight drop expected in the fourth quarter.
While company revenue fell by four percent in the third quarter, Facebook’s costs and expenses rose by 19 percent year over year to $22.1 billion. Operating income declined 46 percent from the year previous to $5.66 billion.
One Wall Street analyst described the news of Facebook’s latest earnings report as a “train wreck.” Facebook’s current state is a long way from its position in September 2021 when it was valued at more than $1 trillion.
Facebook’s shares are now down 67 percent from a year earlier, translating to a massive loss of around $700 billion in market value. The company’s market value is now around $268 billion, roughly a quarter of its $1 trillion value in 2021.
“Meta’s results last night was an absolute train wreck that speaks to pervasive digital advertising doldrums ahead for Zuckerberg & Co. as they make the risky and head scratching bet on the metaverse,” Wedbush analyst Dan Ives said in a report.
But on a Wednesday conference call to discuss the company’s latest earnings, Zuckerberg told investors that he is “pretty confident this is going in a good direction.”