Meta Platform’s stock has been the biggest disappointment of any US tech company this year, with a capitalization of over $1 trillion by 2021. Meta has performed surprisingly poorly and is in the gray end of the market. S&P500 Index, ranking 5th from the bottom expressed in % annual change in market cap, market cap that has evaporated this year… by almost 60%:
- Investors are uncertain whether the Metaverse trend announced by Zuckerberg in the fall of 2021 will pay off for the company. In some interviews, Zuckerberg has suggested that Metaverse is an inevitable path for business growth, one that must be taken even at the cost of massive capital expenditures and diminishing revenues. Positive references to Metaverse have previously been made by, among others, the world’s largest asset management fund, BlackRock, which describes the implementation of digital worlds as only a matter of time in its analytical report “Step into the Metaverse”.
- In the second quarter, the division responsible for Metaverse, Reality Labs, generated $452 million in revenue and lost $2.8 billion. The division accounted for only 1.5% of the company’s total revenue, but has the most funding. According to Zuckerberg, Metaverse products will not have a greater impact on the company’s business until the beginning of the next decade.
- Currently the main virtual reality tool, Oculus VR headset enjoys excellent user reviews and dominates the global virtual reality market. At the same time, their high price and the still limited number of games developed may prove problematic in an environment of rising inflation and a slowing economy. One positive sign, however, is that the Met already has technology that can transport users into an increasingly realistic virtual world. For Zuckerberg, however, it’s still not enough; the company dreams of enabling the full sensory experience in virtual worlds, making them even more immersive.
The share of Meta Platforms in the global virtual reality headset market has been increasing since 2020; in Q2 2022, Oculus accounted for approximately 70% of the global VR headset market. Source: CounterPoint Research
- In early 2019, the company suffered reputational damage due to the ‘Cambridge Analytic’ privacy scandal, Facebook was also damaged by former employee Frances Haugen’s finding that the company knew about the effects of harmful applications on users, including children, but decided not to change something. Some US senators have compared the company’s activities to the concerns of “Big Tobacco”. Also riding the wave of negative sentiment is the Metaverse trend pushed by Zuckerberg, which some critics say is another step in the wrong direction for the community. The name change was one of the marketing elements of the company, which wants to free itself from its sometimes controversial past”. So far, Facebook has shown it can “force” a product despite analysts’ predictions and criticism. Since the start of 2020, another 300 million users have joined Facebook and another 400 million have joined Instagram. The nearly 3 billion people concentrated in Meta’s applications still represent a strong base for potential revenue.
- The company’s IPO in 2012 was painful for investors after Wall Street became skeptical of Facebook’s plans to move the PC experience to the world of mobile phones. However, the app sector proved to be a success, and by the end of 2013, investors had already started buying the company’s shares in large numbers. Is this the same that awaits Metaverse and the transfer of the world of mobile applications to virtual reality? If Zuckerberg and his team succeed in implementing the Metaverse concept and building a business model, the current stock price may turn out to be the “opportunity of the decade,” but the massive number of unknowns still shrink investors’ field of vision, and maintaining an unprofitable company can be particularly painful. when interest rates are high. However, remember the cover of Barron’s financial magazine from 2012, which had the headline “Facebook is worth $15.” Less than four years later, the stock market valued Facebook at $130 per share. And today we are back at those levels.
Meta Platforms (META.US) D1 interval. The diagram shows a sell-off in the company’s stock, which can safely be considered the largest in the company’s history to date. The stock fell to levels below the March 2020 panic, erasing all gains from the 2020-2021 period. At the same time, however, the number of people using Meta’s main applications, Facebook and Instagram, has increased. The first ominous sign of an impending selloff was the intersection of averages, the “cross of death,” which occurred in late 2021 and early 2022. The stock is down nearly 70% from all-time highs. Source: xStation5
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