Facebook’s Stock Just Had One Of The Biggest Crashes In History

By Erika Hanson | 4 months ago

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It’s no secret that Mark Zuckerberg has found himself in hot water the past few years. The founder and CEO of Facebook, or Meta, has been intertwined in some controversial scandals surrounding the popular social media outlet. From reports of illegally harvesting users’ data, to failing to stop political manipulation by foreign governments, a look at the past decade reveals plenty of dissension. And even though the last decade’s performance outlook might have appeared promising on paper, the company has struggled to remain profitable. As the company continues to face scandal and controversy all while ramping up for a new era in social media content, Facebook’s Meta suffered its biggest one-day drop in stock prices this Thursday.

At the close of business Wednesday, Mark Zuckerberg shared Facebook parent company Meta’s fourth-quarter earnings for 2021. Revealing that profits fell during the last quarter of 2021, shares of the stock plummeted more than 26% the following day. As the stock’s biggest one-day drop ever, the crash shaved more than $230 billion from its market cap, bringing the value to about $660 billion. As the day went on, other social media stocks followed the trend. Shares of Snap fell more than 23%, while Pinterest lost more than 10%. Twitter also suffered a small hit, falling a little more than 5%

There are plenty of clues as to why Facebook’s stock has been plummeting, but the leading reasons can be insinuated from a look at Wednesday’s earnings report. As the first official earning report under the companies newfound name, Meta, Zuckerberg’s company displays a dismal outlook. Missing earning estimates, the fourth quarter produced $3.67 billion in revenue off of a projected $3.84 billion. Similarly, the companies revenue forecast of $27 billion to $29 billion for the first quarter fell below analyst expectations of $30.15 billion. 

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Zuckerberg turned his attention to competitors when listing the company’s low earnings on Wednesday. According to him, competition from rival TikTok, whose short-form videos is significantly used more than Facebook’s version, is weighing on the companies ability to monetize their new reels. While this sentiment surely rings true, if anything, it just shows that the company needs to re-imagine there approach to the popular short video method. Similarly, Zuckerberg placed blame on Apple as well. The company took a big hit from Apple’s new privacy changes, which impact its ad-targeting and measuring. According to Facebook, the privacy changes would result in a $10 billion revenue hit this coming year. 

Zuckerberg remained adamant that the dismal earnings were largely due to Facebook’s costly investment in virtual reality technology. Announced a few months earlier, Facebook’s plans for a metaverse to create a virtual environment accessible by many different types of devices where people can work and play is supposed to be a state-of-the-art technology that will change the way social media is used forever. Speaking on his plans for the metaverse on Wednesday, Zuckerberg said, “This fully realized vision is still a ways off,” he said. “And although the direction is clear, our path ahead is not yet perfectly defined.” However, Zuckerberg’s foggy and uncertain display of the Metaverse has largely left investors to conclude that the Metaverse sounds more like a money pit.