Meta shares fall to lowest level since 2016 as Big Tech wipeout continues

Meta CEO Mark Zuckerberg is shown during a virtual event on Oct. 28, 2021. While use of Meta’s various apps grew year-over-year, revenue and profit declined in the latest earnings report. (Eric Risberg/The Associated Press)

hares in the company formerly known as Facebook lost more than 20 per cent of their value on Thursday morning, after the social media company posted quarterly results that showed its core business is slowing even as it’s spending billions of dollars trying to become a leader in the metaverse.

Meta reported Wednesday that it took in $27 billion US in revenue last quarter, down from $29 billion previously. That’s two straight quarters of declining revenue and the company is forecasting the same to happen in the current one, which was enough to send investors running for the exits.

Meta shares were changing hands at just above $100 a share on Thursday morning, a level they haven’t seen since 2016. As recently as February they were worth more than $300 apiece, enough to make the company one of only a handful in the world with a $1 trillion valuation.

The company was once an advertising colossus, but in recent months financial results show upstart rivals like video-sharing website TikTok are monopolizing an increasing number of the eyeballs that once belonged to Facebook or its other service, Instagram.

It was roughly this time a year ago that the company, then known as Facebook Inc. rebranded itself as Meta to showcase its belief that its future lies in the metaverse, a virtual, mixed and augmented reality universe that exists entirely online.

A year later, the company has spent billions of dollars on the metaverse experiment with very little of substance to show for it.

The company’s metaverse-focused unit, called Reality Labs, took in $285 million in revenue during the quarter. But it posted an operating loss of $3.87 billion. It expects that number to get even bigger next year.

Investors are concerned Meta is spending too much money and confusing people with its focus on the metaverse, a concept users don’t yet understand or seem to want — at a time when its other cash cows are starting to dry up.

Richard Lachman, an associate professor at Toronto Metropolitan University, says the company has pushed aggressively into things like expensive virtual reality headsets because they need a « killer app » to drive people into their version of the metaverse

« The adoption has not been huge, » he told CBC News in a recent interview. « Lots of people have maybe tried a game or entertainment, but it’s not leading to massive sales. »

Brad Gerstner, the CEO of Meta shareholder Altimeter Capital, penned an open letter to CEO Mark Zuckerberg earlier this week urging the company to forget about their metaverse experiment, and refocus on their core business.

« Meta has drifted into the land of excess — too many people, too many ideas, too little urgency, » he wrote, urging the company to reduce staffing levels and cut costs. « This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes. »

‘An absolute train wreck’

Facebook isn’t the only tech giant to see its shares fall off in recent months, but the depth of its plunge has been far in excess of what other companies have seen. 

Google shares have lost 35 per cent in the past year, while Microsoft is down by 29 per cent. Over that same period, Meta shares have lost more than 65 per cent of their value.

Daniel Ives, a technology analyst with Wedbush Securities, who covers all the big tech names, called the company’s financial results « an absolute train wreck. »

« The company is facing … privacy issues, massive digital media headwinds, social media share losses, and transforming its business model at the worst possible time with Zuckerberg needing to lead through this perfect storm, » he said.

Insider Intelligence analyst Debra Aho Williamson said the company was once seen as a trailblazer, but that is no longer the case.

« As Facebook Inc., it was a revolutionary company that changed the way people communicate and the way marketers interact with consumers, » she said. « Today it’s no longer that innovative groundbreaker. »

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