Investors have long looked at Facebook’s owner as part of a cohort of dominant technology companies that stood apart from the rest of the universe. After last week’s disastrous earnings report, Meta Platforms is struggling to keep up with those other Silicon Valley giants.
The Mark Zuckerberg-run company has seen more than US$300 billion in market value wiped out in 2022 alone. Facebook’s user growth has stalled in the face of competition from viral video-sharing app TikTok at a time when the company also is spending billions to try to expand in immersive digital experiences.
A social network that can’t keep expanding its user base is potentially in an existential crisis, as sites like MySpace and Orkut learned when Zuckerberg’s brainchild made it big. Given that, investors are treating it much differently than the other so-called FAANG stocks, Apple, Amazon.com, Netflix and Google owner Alphabet.
While all technology stocks have been under pressure in recent weeks, the other megacap companies have seen their shares bounce from recent lows. Not so Meta, which has plunged 30% since reporting results Wednesday. At least 40 analysts have slashed their price targets and JPMorgan Chase & Co slapped its first downgrade on the shares since the company went public in 2012.
“The reaction to Facebook was pretty extreme, but it’s pretty hard to argue with it,” said Ryan Jacob, chief investment officer of Jacob Asset Management, which owns shares of the social media company. “Investors should be cautious given the challenges they have.”
A jump in rival social media stocks Snap Inc. and Pinterest Inc. after their earnings showed that the issues faced by Meta are company-specific rather than an industry slowdown. And for a potential bounce in Meta, it might need the same kind of help that Netflix received: After taking a similar beating, the streaming giant rallied on news that fund manager Bill Ackman had acquired stake, signalling a vote of confidence.
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Meanwhile, Meta is losing a key board member: Peter Thiel, the tech investor and conservative provocateur who has advised Zuckerberg for nearly two decades, will step down after the annual meeting in May. The shares fell another 0.5% on Tuesday.
While Meta already was the cheapest of the FAANG stocks before last week’s collapse, at 15.3 times estimated earnings they’re now at the lowest-ever multiple relative to the Nasdaq 100 Index. And investors aren’t stepping in to buy the dip, preferring other megacap peers that impressed Wall Street with their results.
The divergence highlights the differences between the big tech companies and the scope of the problems Meta is facing,
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“I wouldn’t say they’re dead money, but they’re money on life support,” said Kim Forrest, chief investment officer at Bokeh Capital Partners.
Chipmaker Nvidia Corp’s market value eclipsed Meta’s for the first time on Monday after the social-media company shed nearly US$300 billion in market value in the past three trading sessions. Meta is now the eighth most valuable company in the S&P 500 after being overtaken by Warren Buffett’s Berkshire Hathaway last week.
