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On February 3, Facebook's parent company Meta lost over $230 billion of their market capitalization as their stocks dropped 26 percent. The stocks plummeted 85 points and closed at $237 from around $323 per share on the previous day.
Thursday's stock decline was the most significant "one-day" decline in Facebook's share price. After the drop, Meta's market cap reportedly came down to $660 billion. The decline in stock prices also caused Mark Zuckerberg's net worth to plunge by almost $30 billion.
This sharp decline in Meta's share price occurred after the firm released its earnings calls, including a forecast for its revenue growth next quarter.
The reasons behind Facebook/Meta's stock drop
According to Refinitiv, analysts expected the firm's revenue to be around $30.15 billion in the next quarter. However, Meta's internal projections cited $27 billion to $29 billion in revenue for Q1.
While this may not seem significant to some, the disappointing forecast of revenue growth of the quarter could continue onto the next ones, affecting the firm's overall profitability for the entire fiscal year.
In the earnings call, Meta CFO David Wehner said that Apple's privacy changes to iOS, macroeconomic challenges faced by advertisers, and foreign currency exchange rates were factors that affected their revenue forecasts.
Fall in the Facebook's daily user base
The social media platform recorded a slight fall in its global daily users, which declined from 1.93 billion in Q3 2021 to 1.929 billion. While the decline is somewhat insignificant, the loss of users might have spooked some investors.
Controversies that plagued the company last year
Last year, whistleblower Frances Haugen leaked the firm's internal documents and spoke to the US Senate. She claimed the social media's algorithm specifically targeted content that provoked anger among some users.
In her 60-minutes interview, Haugen said,
"Facebook has realized that if they change the algorithm to be safer, people will spend less time on the site, they'll click on less ads, they'll make less money."
Even after a name change to Meta following these allegations, Facebook never recovered. The company's public perception has been heavily affected since 2018's Cambridge Analytica scandal.
Metaverse will take many years to implement
While Zuckerberg announced Meta's services on the upcoming "metaverse," the platform's vision will take several years before it can be implemented on a mass scale. The technological prowess and efficiency required for Metaverse are not yet fully realized.
According to The Guardian, Meta's VR/AR unit Reality Labs, responsible for their Oculus VR headsets, netted a loss of $3.3 billion and only garnered revenue of less than a billion dollars. This may have concerned some investors.
Furthermore, Meta and its social-media services have been facing competition from the likes of TikTok and Signal. With TikTok's massive popularity gain amidst the pandemic, the company's revenue in 2021 grew by 70 percent since 2020. This fetched the firm's parent company ByteDance $58 billion last year, compared to $34 billion in 2020.
