Meta sheds $200 billion in market value on bleak forecasts

Meta sheds $200 billion in market value on bleak forecasts
25 Apr 2024

Meta, the parent company of Facebook and Instagram, experienced a significant drop in its stock market value this Wednesday, resulting in a loss of nearly $200 billion.

The decrease, which saw the company's shares dip by about 15% in extended trade, was triggered by predictions of increased costs and lower-than-expected revenue.

This decline brought Meta's market capitalization down to approximately $1 trillion.

Meta's forecast also impacted other major tech companies
Market impact

The disappointing forecast from Meta also impacted other major tech companies.

Alphabet shares fell 3%, Microsoft dropped 2%, NVIDIA lost 1.4%, and Amazon declined by 2.6%.

Investors are concerned that the rapidly rising costs associated with artificial intelligence (AI) development may outweigh the benefits, raising doubts about future profitability and growth potential of these tech companies.

Meta's revenue for Q2 is projected to be between $36.5-39B
Financial forecast

Meta's revenue for the second quarter is projected to be between $36.5 billion and $39 billion, falling short of analysts' predictions of $38.3 billion based on LSEG data.

The company has also increased its expense forecast for this year to accommodate investments in new AI products and the necessary computing infrastructure.

During a conference call, CEO Mark Zuckerberg stated that focusing on AI would "grow our investment envelope meaningfully before we make much revenue from some of these new products."

Analysts warn Meta not to neglect its core advertising operations
Business strategy

Despite Meta's emphasis on AI, analysts warn that the company cannot afford to neglect its primary advertising operations.

Lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, stated, "For all Meta's bold AI plans, it can't afford to take its eye off the nucleus of the business - its core advertising activities."

This advice comes as Zuckerberg explores potential ways to monetize Meta's AI chatbot for business messaging and customer support.

Reality Labs division reports $440 million in sales
Performance report

Meta's Reality Labs division, dedicated to metaverse development, reported sales of $440 million for the first quarter, falling short of the anticipated $475 million.

Despite a 30% increase in sales from the previous year, the division incurred a loss of $3.8 billion in the quarter.

This puts it on track to match its previous year's loss of $16 billion.