META Stock Is Plunging. What Comes Next?

  • Meta Platforms (META) fell over 20% overnight after a disappointing quarter and negative guidance.
  • Analysts are angry the bad numbers weren’t pre-announced, and about its metaverse obsession.
  • There remains value in its cloud data centers and global communication business.
META stock - META Stock Is Plunging. What Comes Next?

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Meta Platforms (NASDAQ:META) stock crashed after reporting another down quarter. Net income fell by half to $4.4 billion, $1.64/share. Revenue fell by 4% to $27.7 billion.

In pre-market trading on Oct. 27, the stock was fighting to hold $100 after trading near $130 at the Oct. 26 market close. The shares started the year at about $330. Over $600 billion in Meta’s market capitalization has been destroyed.

Why, Meta Why?

There are two reasons for the crash.

First, advertising is down as companies anticipate a recession. Meta is especially vulnerable since Apple (NASDAQ:AAPL) stopped sharing user data. Numbers coming out of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), with its net income off by 25%, should have been a warning.

Second, in his conference call CEO Mark Zuckerberg refused to back off investments in the “metaverse,” a virtual reality environment that is costing billions each quarter but not bringing in revenue. He told analysts “things are going in a good direction”  and asked for “patience.” Analysts responded by slashing their ratings.

Meta is now trading for less than it did five years ago, with analysts saying things like “FAANG is dead”  and comparing the current market to the end of the dot-com era.

The problem with that analogy is that, while cloud growth is slowing, it’s still growing, and from a very high level. Cloud spending may get near $500 billion this year, up over 20%, and Meta owns 21 cloud data centers with more on the way. All claim to use 100% renewable energy.

Bulls like TV host Jim Cramer, who complained the company wasn’t getting enough respect before the numbers came out, changed sides after the conference call, and was greeted with jeers by other traders. Cramer was angry that Meta’s troubles weren’t pre-announced.

META Stock: What Happens Next?

Meta is definitely the “disaster du jour” but there remains value in its data centers and global business. Facebook, Instagram, and WhatsApp are still primary communication media platforms in the developing world.

A floor for the stock is there. Traders will spend the next few days searching for it. It’s likely to be an investable number.

On the date of publication, Dana Blankenhorn held long positions in AAPL and AMZN. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.

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