Investors have always been looking at Meta Platforms, Inc. (NASDAQ: FB) – now the owner of Facebook – as one of the powerful technology firms that stands out in a crowded tech world. Following last week’s devastating financial report, the struggle for Meta Platforms Inc. to catch up with competitors in Silicon Valley has just started.
The Mark Zuckerberg-led Meta has witnessed nearly $300 billion in terms of market value, going down the drain in just one month. One of the primary reasons behind the slowing growth of Facebook’s user base is the increasing competition from the viral video-sharing app TikTok. And this decline is taking place irrespective of Facebook investing billions of dollars into immersive digital experiences, which is touted to be the future of social media.
The one-third valuation of Facebook that has been wiped off the market is the talk of the town now. Many financial experts believe that Zuckerberg will have to shift gears immediately to avoid further losses and disappointment.
So, is the slump in Meta’s stock a real big deal?
In simple words, yes!
To understand the intensity of the loss, one needs to have a look at the flourishing startup scenario in India. After the US and China, India is the third-largest startup ecosystem for entrepreneurs. Be it investments, or the number of unicorns, or new startups every year, India’s startup scene is flourishing like never before. The record $42 billion investment attracted by the Indian startups in 2021 is a testimony to the fact that all eyes are set on the Indian startup ecosystem considering the doldrums scenario in China.
In the last 15 years, 88 startups in India have achieved unicorn status. Undoubtedly, it’s a big deal for any country. The estimated collective valuation of these unicorns is $297 billion, lesser than what Facebook owner Meta lost in terms of market cap in just one month.
Barring Flipkart, which many don’t consider a startup anymore, Swiggy is the only Indian startup unicorn that has attained a double-digit valuation after the recent round of investment.
Let’s see it from a different perspective;
The skyrocketing net worth of Indian billionaires is no more a secret. For many years in a row, it was Chinese billionaires who dominated the list of Asia’s richest billionaires. However, the boom in the Indian economy and startups have shifted the odds in favour of Indian billionaires. Currently, the list is topped by Mukesh Ambani, followed by Gautam Adani – the two Indian billionaires who built their fortune on the back of the retail revolution in India.
The richest person in China, Zhong Shanshan is rated as the 3rd richest on the list, followed by Zhang Yimming – another billionaire from China.
Undoubtedly, the eye-popping net worth of each of them is a result of hard work, unparalleled commitment to their business, and restless efforts they have been putting in to grow their business for years. The collective net worth of Asia’s top 4 richest people is nearly $299 billion – less than what Facebook-owned Meta lost within 30 days.
Undoubtedly, the loss of Meta is colossal and the situation is worrisome for the board of the internet giant. But all of these lead us to a few impending questions:
- Has Meta reached the lowest point in 2022, or is the worst yet to come for Zuckerberg and the investors?
- Is this the best time to buy the dip?
- Will Meta bounce back by defeating Apple?
The social network, which was on a dream ride up until now, is facing an existential crisis similar to what sites like MySpace or Orkut faced after Zuckerberg’s vision broadened. Because of this, investors have started maintaining distance from Meta’s stocks, unlike the other FAANG stocks, which include Apple Inc., Amazon.com Inc., Netflix Inc., and Google owner Alphabet Inc.
Although all tech stocks have been declining in recent weeks, other mega-cap companies saw their stock prices rebound from the lows they had recently reached. But not like Meta’s stock, which has dropped 36% since the release of results on 2nd February 2022.
More than 40 analysts have cut their price targets. It is the first time when JPMorgan Chase & Co. has cut their estimation of Meta’s shares since it was listed on the stock exchange in 2012.
“No one can deny that the response to Facebook was quite brutal,” said Ryan Jacob the chief investment officer for Jacob Asset Management, which holds shares in the social media firm.
The rise in the stock price of Meta’s competitors in the social space – Snap Inc. and Pinterest Inc. – after the release of their quarterly earnings report, has only intensified the competition for Zuckerberg. It is now proved that the challenges Meta is facing are more company-specific than a general slowdown. For a possible rebound, Meta requires similar assistance as Netflix when it reported losses. The stock of the streaming giant jumped up after the news that the renowned fund Manager Bill Ackman had acquired a stake in the company, signalling an endorsement.
If all the above was not enough to increase the challenges for Zuckerberg, the news of Meta losing a crucial Board member caused a drop of 0.5% in Meta’s stocks yesterday. Peter Thiel, the tech investor who stood by Zuckerberg for more than two decades, advising him on all crucial decisions, is set to retire following an annual board meeting that will take place in the month of May.
At this time, Facebook is one of the lucrative stocks on wall street, but investors are still maintaining distance despite Kevin O’Leary, the celebrity investor a.k.a. Mr. Wonderful, revealing that he bought the dip. Many investors have opted for the ‘wait and watch‘ strategy as they believe that the tug of war between Meta and Apple is far from over, and it will have a severe impact on Meta’s stock value in months to come. Their decision is also influenced by the discloser of Meta, which has estimated below-expectation earnings due to the tracking restrictions introduced by Apple with iOS 15.
The market isn’t ready to buy the dip and is looking at other mega-cap peers instead, as they have impressed Wall Street with their results.
Meta’s pivot towards metaverse may be a mirage. They should consider incremental AR offerings similar to those from Snap. Social networking may have passed it’s peak. There are other high school growth segments such as cloud migration platforms.