Meta is forced to reinvent itself to avoid the decline

A year ago, before Facebook would become GoalThe company of mark zuckerberg had a market capitalization of 1 trillion dollarswhich placed her in a select area along with companies like Manzana (AAPL), Alphabet (GOOGL) or microsoft (MSFT).

Today, the present Goal it is totally different from the one registered at the end of 2021. Nowadays, The technology company is listed at January 2019 valueswhich represents a drop of almost 64% from the highs of September last year and is about to close its third consecutive quarter of losses double-digit percentages, since just four S&P 500 stocks They are having a worse year.

Zuckerberg said he hopes that in the next decade the metaverse “reach a billion people” and “hostel hundreds of billions of dollars of digital commerce”. Last June he told Jim Cramerof the CNBCthat “North Star” is to hit those kinds of numbers by the end of the decade and create a “massive economy” about digital goods.

Mark Zuckerberg: the turn towards the metaverse he paid with his fortune

However, investors they are not enthusiastic about the technological universe proposed by the CEO of Meta, and the way in which are dumping stock makes some observers wonder if the downward pressure is actually a spiral from which Meta cannot recover.

What is the meager performance of Meta due to?

“On the one hand, we have fewer active users (mainly young people), who are jumping to other social networks, such as TikTokwhich has another dynamism, even with another type of more efficient algorithm”, he explained to PROFILE Damien Vlassich, equity analyst of IOL invested online.

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“This phenomenon has caused the company to see reduced advertising revenue (main source of income for the social network), a situation that has led Meta report for the second consecutive quarter a slowdown on their income,” he added.

The market discouragement

“Precisely this point is central, since Facebook has stopped telling a story of continuous growtha situation that discouraged the market, despite the fact that it is still a company that reports almost US$ 7 billion quarterly earnings,” he said. Vlassitch.

Zuckerberg said about it that his company would be “something smaller” by the end of next year. “During the first 18 years of the companybasically we grew rapidly every year, and then more recently our revenue has been flat or slightly down for the first time.”

To this, we must add that the young audience that migrated to TikTok are future consumers who “they won’t do it on Meta’s social networks”, he emphasized Vlassitch. “So the challenge in the loss of users and therefore of income it is not only the current one, but the prospects of further deterioration in the future”.

What happened to the Metaverse?

“On the other hand we have the challenge posed by the development of the Metaverse. Something that, although it was announced with a lot of marketing, and even in a conference given by Zuckerberg himself from the virtual platform, means an investment with a very high sunk cost for the company”, added the expert from IOLs consulted by PROFILE.

“To graph what it represents for the company itself, we observe that in a scenario like the current one, where the Federal Reserve is running an aggressive monetary policy with increases in interest rates, the cost of financing becomes more expensive. This is clearly seen in the evolution of the item cash and equivalents of its balancewhich, as of the second quarter of 2021, totaled US$ 64,080 million, and the same, was reduced by 46% in 9 months, totaling at the end of the first quarter of this year $43.89 billion”, he detailed.

In addition to the above, the development of the Metaverse it is not clear not only because of the adoption of the competition but because of the competition of projects in the blockchain that are more advanced, like for example Decentraland. Therefore, the other critical point is that Meta is spending scarce resources and expensive with a project whose end result is not clear,” he added. Vlassitch.

What can be expected for the next years of Meta?

“There is no doubt that the next few years represent a challenging scenario for the social network. It will have to face greater competition, at the same time that it will seek the development of the Metaverse project in a context adverse to financing and trying to keep your finances from being affected”, answered Vlassitch.

“This is a key point and it is precisely where the market has more doubts and in a certain way, it puts a brake on it to aggressive rebounds regarding the price of the share”, he added.

Is it advisable to invest in Meta shares taking advantage of its fall?

“For now from IOL they invested online we do not recommend investing in Meta Platforms no matter how much the 64% drop tempts the investor, What goes down doesn’t always come up and there are plenty of examples”, he concluded.

As PROFILE reported, Meta faces a major challenge, especially since Zuckerberg spends much of his time proselytizing the metaverse, what could be the future of the companybut what No accounts for virtually none of your short-term income and which cost billions of dollars to build year.

From Facebook to Meta: Mark Zuckerberg announced the name change of his company

It should be clarified that it is not being suggested that Meta or Facebook is at risk of going bankrupt. The firm continues to have a dominant position in mobile advertising and has one of the most profitable business models on the planeteven with a sharp drop in net income in the last quarter.

the problem you have Wall Street with Meta is that it no longer represents a growth story. Until this year, that’s all the company has offered. The number of daily active users in the United States and Canada collapsed in the last two years, from 198 million in mid-2020 to 197 million in the second quarter of this year. Worldwide, the number of users increased by 10% in that period and is expected to increase by 3% per year until 2024, according to estimates from FactSet.


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