Facebook’s parent company, Meta, suffered a historic and brutal correction on the New York Stock Exchange on Thursday, losing more than a quarter of its value and wiping out more than $200 billion in valuation, unprecedented for the company of Mark Zuckerberg but also for Wall Street.
The social media giant, which lost users in North America for the first time in its history, announced post-closing Wednesday a lower profit in the fourth quarter and an outlook for slower growth in the first, which greatly disappointed investors.
“It’s been a black eye quarter,” said Wedbush analyst Dan Ives.
Thursday, the title of Meta Platforms was sanctioned at the opening to finish down 26.39% to 237.76 dollars. That’s a plunge of more than 37% since its last high in September at $382.18.
This spectacular fall of one of the largest capitalizations on Wall Street led to a plunge in the Nasdaq index, which is predominantly technological (-3.74%).
– New Zealand’s GDP –
As the stock price plummeted like a rock, Facebook’s capitalization – valued at $879 billion at the close the previous day – suffered a phenomenal loss, the largest in Wall Street history, founding d at least $200 billion in one session.
“200 billion dollars is more than the combined capitalization of 452 companies in the S&P 500”, which has only 500, as its name suggests, noted Gregori Volokhine, president of Meeschaert Financial Services.
It is also almost the equivalent of the Gross Domestic Product (GDP) of an entire country like New Zealand.
The fortune of Facebook boss Mark Zuckerberg, estimated at $113 billion at the close of trading on Wednesday, according to SEC documents, has also suffered a severe amputation. The co-founder of the social network was virtually relieved of almost 28 billion dollars.
Meta, which oversees Facebook, Instagram, WhatsApp and Messenger, saw its net profit decline in the fourth quarter and the number of users of its platforms stagnate.
Facebook itself has lost a million daily users, which is unprecedented for the social network which has always known, in 18 years of existence, to capture new users.
The network has admitted to facing fierce competition from younger users from the ultra-popular short video platform TikTok.
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On a turnover of 33.67 billion dollars, Meta generated “only” 10.3 billion dollars of net profit in the fourth quarter, or 8% less than last year.
“It was a disastrous quarter and clearly Facebook faces serious challenges this year with Apple’s privacy policy changes and competition from TikTok,” Ives said.
For the first quarter, the group forecasts the weakest growth in its history.
Facebook’s disappointing projections come as the stock market has been very nervous and volatile since the start of the year, which saw the US central bank (Fed) signal that it would soon raise interest rates.
So-called growth tech stocks, which are highly interest rate sensitive, have corrected since January.
“It comes at the worst time because investors are very nervous in an environment of rising rates” by the Federal Reserve, further underlines the Wedbush analyst.
A higher cost of money reduces the outlook for results and therefore the valuation of technology groups, which is based on their growth.
“Tech companies are valued on multiples of their future earnings,” says Adam Sarhan of investment advisory firm 50 Park Investment.
“If they don’t grow anymore, it’s a complete reset for investors: that’s why you saw that 25% drop overnight,” says Adam Sarhan of investment advisory firm 50 Park Investment.
Apart from Facebook, other Nasdaq fetish stocks, favored during the Covid-19 pandemic, have been violently sanctioned in recent weeks by the market.
This is the case of Netflix, which lost almost 22% in one session on January 21, virtually wiping out $40 billion in valuation after announcing a disappointing subscriber growth forecast.
Other investors saw this plunge as an opportunity for a good deal: “We don’t think the market reaction is justified and we believe that Meta shares are now an attractive investment opportunity”, judged Ali Mogharabi, a analyst for Morningstar.
© 2022 AFP
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