NEW YORK (AFP) - Facebook's parent firm Meta on Thursday (Feb 3) plunged over US$200 billion (S$260 billion) in stock value - comparable to the size of New Zealand's economy - after results that raised doubts about the troubled social media giant's future.
In addition to costs of big investments on its metaverse vision for the Internet and trouble for its core ads business, the firm predicted slower growth and even reported its first dip in daily users globally on the signature Facebook platform.
Facebook has long been marked by an insatiable push for growth, and now has nearly two billion daily users, but the results laid bare the challenges facing the social media giant on several fronts.
Shares have been down about 25 per cent since shortly after the opening in New York, resulting in a more than US$200 billion hit to the company's market value.
"It was a disaster quarter for Facebook and clearly they have some major headwinds over the next year," Wedbush's Dan Ives said.
Facebook founder Mark Zuckerberg had some US$25 billion in value wiped from his personal holding by the rout on Wall Street, according to filings on the company stock he owns.
Risk of not growing
Meta, which also owns Instagram and WhatsApp, has noted that it faces fierce competition for young users from the likes of explosively growing short-form video platform TikTok.
Ahead of results, analysts expected 1.95 billion daily active users on Facebook, but Meta reported 1.93 billion - a key indicator for where the platform is headed.
On the financial side, Meta reported a turnover of US$33.67 billion, in line with its forecasts, but it made US$10.3 billion in net profit in the fourth quarter, 8 per cent less than last year.
Investors also recoiled at Facebook's report of losing roughly one million daily users globally between the last two quarters of 2021 - a fraction of the total but a potential signal of stagnation.
"It's the first time the user base is shrinking," said analyst Adam Sarhan from 50 Park Investment. "If the company is not growing, then it's a complete reset for investors."
It is essential to note Meta is a still massive and growing on the whole - as 2021 closed, 2.8 billion people used one of its four platforms and messenger services at least once a day, and 3.6 billion at least once a month.
One way out of Meta's troubles would be to acquire the next big thing in social media, as it has done previously.
But the company is under considerable scrutiny from US regulators after the damning allegations that emerged from its whistleblower crisis last year.
The internal documents leaked by ex-worker Frances Haugen highlighted accusations that executives prioritised growth over keeping their billions of users safe.
However, Thursday's dramatic sell-off is the latest to confront a Big Tech firm after a similar liquidation of Netflix shares last month, though the streaming giant has somewhat rebounded since.
Other tech giants such as Apple and Google parent Alphabet have rallied after results - though they both recently posted excellent numbers that calmed jittery markets.
Stocks have risen the last four days as the markets try to rebound from a bruising January pressured by worries over shifting US Federal Reserve policy and uncertainty over the crisis in Ukraine.
But the sharp fall in Meta and some other tech names "is raising doubts about the sustainability of the broader rebound effort," said Briefing.com analyst Patrick O'Hare.
The net loss from Meta’s Reality Labs, the company’s augmented and virtual reality business, was US$10.2 billion for the full year of 2021, compared with a US$6.6 billion loss the previous year.
Mr Zuckerberg had previously warned that the company’s investment in this area would reduce 2021 operating profit by US$10 billion and would not be profitable “any time in the near future”.
Reality Labs posted revenue of about US$2.3 billion in 2021. The company has not made public the sales numbers for its virtual reality Quest headsets.
The company said on Wednesday it would change its stock ticker to “Meta” this year, the latest step in its rebrand to focus on the metaverse, a futuristic idea of virtual environments where users can work, socialise and play.
Facebook, which changed its name in October to reflect its metaverse aims, is betting that the metaverse will be the successor to the mobile Internet.
“Investors looking at Meta are starting to realise that buying its stock is no longer mostly an investment into its ad platform,” said Mr Flynn Zaiger, CEO of social media agency Online Optimism. “Investing in Meta now looks more like a commitment that you believe that the metaverse will replace much of the Internet consumers’ experience today.”
Meta’s rebrand comes at a time of increasing scrutiny from lawmakers and regulators over allegations of anticompetitive conduct and over the impacts of how it handles harmful or misleading content across its Facebook and Instagram platforms.