Meta’s stock sinks 20% as metaverse spending spree continues
Meta’s third quarter earnings showed a $3.7 billion hole in the balance sheet due to spending on its metaverse division, Reality Labs – resulting in a sharp sell-off after hours.
Wednesday’s revelation means that Reality Labs has lost an eye-watering $9.4 billion so far this year. The social media giant said Reality Labs generated $285 million in revenue for the quarter, down from $558 million in 2021.
Meta’s stock initially jumped to $140 after hours, before eventually settling at $105.02 at a nearly 20% loss — or a 25% from its after-hours peak.
Analysts reacted in a similar vein to the company’s earnings. Mark Zuckerberg’s plea for patience has fallen on deaf ears, AJ Bell’s head of investment analysis, Laith Khalaf, said. “Spouting on about the metaverse when in the here and now the social media business is struggling is about as palatable for the market as Jack banging on about magic beans to his mother when all she wants is to put food on the table,” Khalaf wrote in an emailed update.
Whether or not Zuckerberg will find treasure at the top of “metaverse beanstalk” remains to be seen, Khalaf added, “but the market reaction to its third-quarter numbers was brutal.”
Digital advertising poses another issue for Meta, Hargreaves Lansdown lead equity analyst Sophie Lund-Yates said. “Meta’s platforms don’t hold as much sway with marketing teams as they need to.”
“Meta also faces stiff competition from the likes of TikTok, Snap, etc., who are eating its lunch among younger consumers,” Neil Wilson, chief market analyst at markets.com, said, echoing Lund-Yates.
It’s not just Reality Labs and Zuckerberg’s metaverse motives that are cause for concern; expenses are rising, according to Wilson.
“Overall expenses are soaring and seem to be getting out of control, with 2023 expenditure seen rising from around $86bn this year to between $96bn and $101bn,” he said.
Crypto prices hold firm
Meanwhile, cryptocurrencies remained steady, with most holding onto gains from earlier in the week despite U.S. stock indexes closing down on Wednesday.
Bitcoin was trading at $20,604 today, down 0.1% in the past 24 hours, according to data via Coinbase, while ether was trading at $1,548, up 1.1% in the same period. In traditional markets, the S&P 500 closed down 0.74% on Wednesday, while the Nasdaq 100 shed 2.26%.
Elsewhere, dogecoin was the big winner on Thursday, trading up over 13% to $0.075, according to Coinbase data.
Speculators have linked the rise in dogecoin to Elon Musk’s bid to takeover Twitter, which appears to be in the final stages, as the Tesla CEO stopped by the company’s HQ for coffee on Wednesday.
© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Go to Source
Author: Adam Morgan McCarthy