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Top 3 Reasons Behind Meta Platforms Inc’s US$650 Billion Loss In 2022

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Meta's US$650 Billion
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Pre-October 2021, Facebook was riding at an all-time high. The company had reached its peak value of over US$1 trillion, joining the exclusive club of Apple, Microsoft, and Amazon.

Then the board decided on a rebrand of the company rechristening it as Meta Platforms Inc.

28th October 2022 marked the first foundation anniversary of Meta Platforms Inc, the parent company of Facebook. Since the rebrand as Meta, the company has experienced several bouts of financial freefall in the last 12 months.

Meta’s 365 Days Journey

Analysts compared the market value of Meta Platforms Inc over the last year since the company announced its plans to rebrand in October 2021. They concluded that since rebranding as Meta Platforms Inc, the company had lost a staggering US$ 650 billion in market value.

In February, the Meta 2022 update said the company’s stock dropped 23%. The tech giant witnessed a fall in its daily active users for the first time. It was followed by a revenue decline for the first time in July 2022. As recently as 27th October 2022, Meta Platforms Inc shares plummeted by 24% to US$ 101.43. It is the lowest stock price recorded in four years, wiping out over half a trillion dollars in market value in 2022 alone.

Meta’s Drop in Share Price Value in 2022

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The company has been experiencing turbulence in the last 12 months, reporting that profits had halved during the third quarter of the financial year 2022-23. In addition, advertiser spending decreased significantly amidst the fears of an impending global recession.

Meta Platforms Inc’s chief executive officer and largest shareholder Mark Zuckerberg saw a massive drop in his net worth by US$ 11 billion since the stock prices plummeted to historic lows.

According to social media news, the company that was once a part of the ”’top 10 most valuable companies in the world” currently has a market capitalization of $263 billion, a fall from US 900 million in October 2021. To put these numbers into perspective, this value is lower than Home Depot’s. With its new market value, Meta Platforms Inc no longer features in the ranks of the top 20 companies in the world.

3 Reasons That Led to Meta Platforms Inc’s Loss in Market Value

From the beginning of 2022 to the completion of its first year of operation, Meta Platforms Inc has shed 70% of its value.

Let’s look at the top reasons that led to Meta’s financial freefall.

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1. Metaverse Costs Are Insanely High

According to Mark Zuckerberg, the founder of Facebook and CEO of Meta Platforms Inc -The ” Metaverse” is the next big thing in the internet world, and he is willing to bet on this gen-next concept. The company has spent over US$ 10 billion in the last 12 months and is estimated to keep investing more funds in the metaverse.

However, there is little evidence to establish now that Mark Zuckerberg’s bet in the metaverse will pay off anytime soon. The primary reasons for this are:

  • Virtual reality is still in an experimental stage, with only a few niche individuals able to gauge its boundaries
  • The mainstream usage of augmented-reality headsets still must take off

At this point, Mark Zuckerberg’s metaverse is still a vision and can only steamroll into success if users and investors have faith and confidence in him and Meta Platforms Inc. Unfortunately, it may still be years that the cost of the metaverse will be realized by the company. All possibilities may not come to fruition at all.

2. Wild User Growth Has Hit a Ceiling

It has been some time since Meta Platforms Inc has experienced wild user growth for Facebook, the company’s primary social media platform. Moreover, the user gains over the last three quarters have been modest across its family of applications, including Instagram, Messenger, and WhatsApp.

According to the latest user growth reports:

  • Facebook has lost about half a million users in the fourth quarter from the previous quarter
  • The quarterly growth rate was the slowest in the last three years

In the company’s 18-year history, this is the first of its kind decline in user growth. This decrease in new users could signal that the platform may be reaching its peak.

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Number Of Daily Active Facebook Users Worldwide as of 3rd Quarter 2022 (in millions)

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While the leadership at Meta Platforms Inc is exploring other avenues of growth opportunities, the efforts are still nascent to generate substantial revenue for the company instantly to offset the loss trajectory anytime soon.

3. And Then There was Apple

Apple has been at the forefront of protecting user privacy for its users. The recent updates introduced by Apple, like the “””App Tracking Transparency””” protocol for its mobile operating systems, are now limiting the reach of Meta. This update allows iPhone users to allow mobile applications such as Facebook to track and monitor their online activities.

What this means for Meta Platforms Inc is that it is no longer privy to user information for a significant bulk of the population who use Apple devices and choose not to allow monitoring of their internet activities. Limited access to user behavior intelligence is sure to hurt Meta’s business which operates on tracking its users across online platforms.

Is This the End of Meta?

Perhaps not, because even with the dip the stock is trading at 17 times its LTM earnings. Despite the value trap, Wall Street analysts are hopeful that the company will be able to increase its revenue by more than 11% in 2022.

Considering that Meta, Zomato, Paytm, and other technology stocks have been facing several headwinds, do you believe it is the right time to invest in them? Whether you consider these stocks a good investment or not, you must do your due diligence before you invest.

Remember, thorough research is a must to understand the company, its products, its moats, strengths, its management, and promoter holdings before you choose a stock to invest in. Long-term investing is the way to go if you want to build a well-diversified portfolio and create wealth.

FAQs

What is metaverse?

Metaverse is a technology that involves the transition of people across different virtual- and augmented-reality worlds.

What is a good example of a metaverse?

Sandbox is a metaverse example that allows users to create and play in virtual worlds with the option to monetize their experiences, services, and products for sale or trade.

Can you make money on metaverse?

There are many ways to make money on the metaverse like flipping digital assets, hosting virtual events, etc.


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