How big was the fall?

To put things in perspective, the value loss in Meta in a single day was the biggest fall in stock market history. On 04-Feb, the stock of Meta fell by 26% and wiped $232 billion of market cap in a single day. The worst fall till date was the $182 billion that Apple had wiped out in a single day in Sep-20. In fact, 5 out of the 10 biggest single day falls was of Apple and two were of Facebook. But, is there much more to this fall? 

Let us buy on dips, really?

Some of the popular US investors like Kevin Leary admitted to have jumped in and bought the fall in Meta on 04-Feb. However, not all the analysts and fund managers are equally enthusiastic about the prospects of Meta. The concern is on two fronts. Firstly, company guided a weak few quarters, but that was not the real shocker. The company identified the tweaks by Apple in its app as a key reason as it was supposed to cut Meta revenues by nearly $10 billion. However, the bigger worry is that the big cash engine of Meta, the advertising cash cow, may be coming into question. That is what is really worrying Meta investors. 

Structural problems for Meta

Most analysts argue that the challenges for Meta may not be as simplistic as it is made out to be. For instance, privacy changes made by Apple would sharply impact its ad targeting and measuring. For year 2022 alone, the revenue hit could be more than $10 billion, with a 10% impact on the profits. Analysts are also concerned that most of their funds are being invested in the Metaverse, which is going to be a drag on revenues and profits in next few years. This front ending of outflows and uncertainty of outcome is the big issue. Above all, high inflation is pinching corporate budgets and advertising is the biggest casualty. 

Continuous evolution is the key

One of the big lessons that Metaverse must take from this episode is the need to continuously evolve. One thing that puts up companies like Apple, Google and Amazon is the ability to consistently evolve and fine-tune their models.  The social media clout of Facebook has been challenged by niche players like Instagram, Twitter, LinkedIn and many regional plays. The erstwhile domination dividends are no longer available to Facebook; which has now forced them into the Metaverse. If the Metaverse really takes off, and that is still a big question mark; then Meta will be able to savor the fruits of its efforts. Else, Meta will have a lot of tough questions to answer to all its investors in future!