Tuesday, March 21

What led Facebook to lose about $ 200,000 million in a single day

“To understand the magnitude of the fall of Facebook, it’s like half of Argentina’s Gross Domestic Product has disappeared in one day”, compared Maximiliano Donzelli, Head of Research at IOL invested online.

The sharp slump, which comes before Amazon presents its results on Thursday, extended to Europe, where technology led sector declines with a decline of 2%, while souring the mood in global financial markets, on a busy day of central bank meetings.

Facebook’s parent company reported earnings per share of about $3.67 on Wednesday, falling short of analyst estimates of $3.85. In relation to its income, it reported some US$33.670 million, in this case, being higher than the consensus forecasts, which had calculated some US$33.340 million.

But the bearish reaction of investors was explained, in part, because Facebook’s global daily active users decreased for the first time from the previous quarter. In turn, facing the first quarter of the year, the company led by Mark Zuckerberg offered some forecasts lower than expected by the market, in regard to its turnover.

US tech majors have come under increasing pressure in 2022 as investors expect the Federal Reserve’s policy tightening to erode the sector’s rich valuations after years of ultra-low interest rates. The Nasdaq lost more than 8% in January, its worst monthly drop since the end of 2019.

“The lowering of earnings prospects by Meta and other companies caught the markets by surprise”, dijo Kenneth Broux, estratega of Societe Generale in London. “Technology selling spread to broader equity markets this morning and with the Fed preparing to raise interest rates, we could see more volatility going forward.”

Meta posted a decline in the number of daily active users from the previous quarter for the first time, as the race for users with rivals like TikTok, the video-sharing platform owned by China’s ByteDance, intensifies. Paradoxically, the moment of greatest competition arises in a context where the company is facing various anti-trust charges.

But in addition, the directors of the technology company stated that the weaker performance of the company in recent times is widely related to measures Apple has taken to improve user privacy. “In particular, Apple’s new App Tracking Transparency (ATT) framework, which requires apps to ask users for permission before tracking them across other apps and websites, is what is negatively impacting Facebook’s business, according to the director of operations of the company, Sheryl Sandberg “commented Donzelli.

The disappointment around Meta was reminiscent of the outbreak of the tech bubble in the year 2000 and showed that, after the sector’s record run, investors have become very selective. The so-called FAANG group – Alphabet’s Facebook, Amazon, Apple, Netflix and Google – have seen some $400 billion of market capitalization evaporate in the first weeks of 2022, as the cheapest segments of the markets have become cheaper. attractive as central banks taper stimulus.

The Metaverse is causing more expenses than expected

One of the big bets that the company has made over the last year has been related to the company’s new focus, which will be increasingly linked to the development of virtual reality (known as the Metaverse). “The company is investing a lot of money in the Metaverse, a project on which it places its hopes for its future growth. However, those investments for the long term ended up causing a reduction in earnings in the fourth quarter,” said the Head of Research at IOL invested online.

In the previous presentation of results, Zuckerberg himself had indicated that ehe Metaverse represents one of the main investment areas and forms one of the pillars of the company’s long-term strategy. Thus, they expect that in the next 10 years this concept will involve 1,000 million people and hundreds of millions of dollars in digital commerce.

However, far from rewarding innovation, the market is usually reluctant to anything that is very far away in time. “For those investments that see the Metaverse as a not too distant future, the recent fall is presented as an opportunity to consider in a long-term portfolio. Let’s not forget that, beyond the bet on the future, Meta Platforms continues to win money,” Donzelli concluded.