On 3 February 2022 shares in Meta, Facebook’s parent, plunged 26% on Wall Street after its results: the biggest one-day loss of value by a US company. Why it fell.
Shares in Meta Platforms, the group that controls Facebook, Instagram and WhatsApp, fell 26.4% on Thursday 3 February 2022, to about $238, a day after it reported its fourth-quarter 2021 results. The company lost more than $200 billion of market value, according to Reuters’ calculations; other estimates put the figure at between $230 billion and $250 billion. It is the biggest loss of market capitalisation by a US company in a single session: the previous record belonged to Apple, at about $180 billion, on 3 September 2020.
What the results said
Meta had revenue of $33.671 billion in the fourth quarter, up 20% on a year earlier, and $117.929 billion for the whole of 2021, up 37%. But its quarterly profit fell 8%, to $10.285 billion, because of higher costs. For the first quarter of 2022 it forecast revenue of between $27 billion and $29 billion, growth of 3% to 11%, well below the 20% of the previous quarter.
Facebook ended December with 1.93 billion daily users, up 5% on a year earlier; but, according to Reuters, it was the first time the figure had fallen from the previous quarter, as competition from TikTok grew. The figure mattered especially because advertising depends on the size of the audience. Meta blamed its weak forecast on Apple’s privacy changes, which make it harder for advertisers to target and measure their campaigns, and on greater competition. The results statement itself warned that the first quarter of 2022 would be compared with a period in which those iOS changes were not yet in effect.
The bet on virtual reality
Reality Labs, the virtual and augmented reality division with which Meta wants to build the so-called metaverse, lost $3.304 billion in the fourth quarter and $10.193 billion over the whole of 2021, on annual revenue of $2.274 billion. Meta is the name Facebook gave the group in October 2021, in the midst of its push into that project; headcount grew 23% in 2021, to almost 72,000 employees.
The spillover to the rest of the market
The fall dragged down other internet and social media companies: Snap fell 23.6%, Pinterest 10.3% and Twitter 5.6%. Alphabet and Microsoft fell more than 3% and Amazon 7.8% ahead of its results. The Nasdaq closed down 3.74%, its worst session since September 2020, and the S&P 500 down 2.44%, its worst since February 2021. Meta’s loss of value alone took 0.9% off the Nasdaq’s capitalisation.
For an investor in Spain, Meta is one of the largest listed companies in the world and is part of the main US indices, so a fall like this is felt in the funds that track them. It is worth knowing how much exposure you have to a small group of big technology companies, directly or through funds, and remembering that their share prices can move this sharply after a set of results. Ask your adviser how this applies to you.
On the stock market, the forecast weighs more than the quarter already closed.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
