Drastic downfall for Meta as share value falls by 22% at Wall Street

The Nasdaq fell 0.2% as a result of Meta’s decline while the Dow Jones Industrial Average gained 223.03 points, or 0.70%, at the opening to 32,062.14.

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The majority of Wall Street’s stocks are starting the day higher, with the notable exception of Facebook’s parent corporation. After Chief Executive Officer Mark Zuckerberg asked investors for patience with the social media giant’s growing investments in unproven bets at a time that is already difficult for digital-advertising companies, Meta Platforms fell as much as 25% on Thursday morning.

The Nasdaq fell 0.2% as a result of Meta’s decline, while the Dow Jones Industrial Average gained 223.03 points, or 0.70%, at the opening to reach 32,062.14.

The S&P 500 dropped after the session began in the green.

The government’s announcement that the US economy returned to growth last quarter, expanding 2.6%, gave the markets some upbeat economic news.

After data revealed that the US gross domestic product increased for the first time this year, the dollar’s gains were reduced. Ten-year Treasury yields fluctuated after briefly falling below 4%.

After reporting excellent third-quarter revenues, aided by customer engagement on its app, McDonald’s stock increased by 3% in premarket trading. Thanks to high summer travel demand, Southwest Airlines saw a more than 4% increase as it recorded record operating revenue in its third quarter.

Shareholders of Meta Platforms are truly suffering

The cost of Meta’s investments in the metaverse is being borne by its shareholders: The market value of the parent company of Facebook has plummeted by a staggering $677 billion this year, knocking it out of the top 20 global corporations.

There are no indications that the punishment will soon lessen. After frightening investors with rising costs to fund their version of virtual reality and a drop in sales, Meta’s stock is down as much as 25%.

At the beginning of the year, Meta was the sixth-largest US corporation by market capitalization and was just shy of having a $1 trillion market value. In ten months, the stock will have grown to a value of around $258 billion, placing it 26th overall. Currently, it has a lower market worth than organisations like Chevron Corp., Eli Lilly & Co., and Procter & Gamble Co.

Meta, once beloved by Wall Street, is increasingly losing popularity with brokerages. After the business provided a dismal quarterly revenue projection, at least three investment banks—Morgan Stanley, Cowen, and KeyBanc Capital Markets—cut their ratings on the shares.

“Meta remains too aggressive with its investments in long-term initiatives despite a sharp deceleration in expected revenue growth,” said Mandeep Singh, an analyst at Bloomberg Intelligence. “The company’s opex and capex view for 2023 is surprising, given the lack of traction so far with its metaverse efforts.”

Even if Thursday’s premarket decline is a significant development, it is nothing compared to the stock’s record-breaking collapse in February, when it fell 26% in the wake of dismal earnings news and lost roughly $251 billion in market value. The largest market value loss for a US corporation has ever occurred.

Value investors, who purchase beaten-down equities in anticipation of a rebound, have been drawn to the stock’s slide this year. But there’s little indication that those wagers will succeed any time soon.

A year ago, Meta Platforms announced a change in focus from traditional investments to virtual reality, as well as a name change from Facebook Inc. to Meta Platforms. The business stated on Wednesday that it anticipates its overall expenses for this year to range between $85 billion and $87 billion.

This amount is projected to increase to between $96 and $101 billion in 2023. According to Neil Campling, an analyst at Mirabaud Securities, that is the major drawback given that investors were hoped Meta would make significant cost reductions.

According to Bloomberg data, the company’s quarterly capital expenditure exceeded what all but 16 of the S&P 500 companies spent overall last year.