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What is behind the slide in the Facebook share price?

Posted: 4 February 2022 12:29 pm
News
Facebook-shares-04Feb_1800x1000_Finder

Shares in the US social media giant lost more than a quarter of their value overnight.

Shares of Facebook parent Meta Platforms, Inc. (NASDAQ: FB) plummeted more than 26% overnight to US$237.76, in what is the biggest single day decline in market value for a US company.

The fall was the stock's worst since listing in 2012.

What's the go?

The slide in the social media giant’s share price, which wiped out a record US$230 billion dollars in market capitalisation, followed the release of Meta’s weak fourth quarter update the previous day, along with a gloomy outlook.

Facebook said its December quarter revenue increased 21% year on year to US$33.7 billion, compared to 35% growth in the third quarter.

The social media platform, which is one of the largest companies on the US stock market, also reported a decline in daily active users – to 1.929 billion from 1.930 billion – for the first time since its inception.

Meta also forecasted first-quarter revenue in the range of US$27 billion to US$29 billion, far lower than analyst expectations of upwards of US$30 billion.

Meta said it faced a hit from Apple's privacy changes to its operating system, which has made it harder for brands to target and measure their ads on Facebook and Instagram. It also cited macroeconomic issues like supply-chain disruptions.

Rising competition

The tech giant is facing pressure from rival platforms like TikTok and Google's YouTube due to increased competition for users' time and a shift of engagement toward such features as its short video offering Reels, which generate less revenue.

Net loss from Reality Labs, the company's augmented and virtual reality business, was US$10.2 billion for the full year 2021, compared with a US$6.6 billion loss the previous year. The company has been investing in a virtual environment in a bet the metaverse will be the successor to the mobile Internet.

The slide in Meta’s shares comes at a time when big tech-focused companies have come under increasing pressure amid a looming policy tightening by the US Federal Reserve that will erode the industry's rich valuations. Many analysts expect the so-called FAANG stocks to face an investor whiplash after years of ballooning valuations.

Meta, in particular, has also come under increasing scrutiny from lawmakers and regulators over allegations of anti-competitive conduct and the impact of harmful or misleading content across its Facebook and Instagram platforms

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