Meta's $677 billion rout boots it out of the world's top 20 stocks

Net profit cut in half, even as Zuckerberg seeks 'patience' from investors

Meta Platforms shareholders are paying dearly for its spending on the metaverse: The Facebook parent’s market value has collapsed by a whopping $677 billion this year, forcing it out from the ranks of the world’s 20 largest companies.

The punishment shows no signs of easing anytime soon. Meta’s stock is down as much as 25 per cent after it spooked investors with ballooning costs to fund its version of virtual reality and a decline in revenue. 
 

Meta was the sixth biggest US company by market capitalisation at the start of the year, flirting with a $1-trillion market value. Fast forward 10 months and the stock will be worth about $258 billion, ranking it 26th. Its market value is now smaller than companies including Chevron, Eli Lilly and Procter & Gamble.
 

The firm’s revenue fell 4 per cent in the third quarter ended September 30. Overall net income was down 52 per cent to $4.4 billion in the third quarter. 
 

More troubling was the company’s estimate that fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, mostly under analysts’ estimates of $32.2 billion, according to the Refinitiv data.
 

On a call Wednesday after giving a disappointing revenue outlook, Chief Executive Officer Mark Zuckerberg sought to justify Meta’s ballooning costs to fund its version of virtual reality, the metaverse, as well as the artificial intelligence fueling major changes to its social networks. He asked investors for patience with the social-media giant’s swelling investments in unproven bets at an already-challenging time for digital-advertising companies.

 

Once a Wall Street darling, Meta is gradually losing favour with brokerages. At least three investment banks — Morgan Stanley, Cowen and KeyBanc Capital Markets — cut their rating on the stock after the company gave a disappointing quarterly revenue outlook.
 

Meta announced its shift to investing in virtual reality a year ago, along with a name change of the company from Facebook Inc. to Meta Platforms. The company said Wednesday it expects total expenses for this year to be $85 billion to $87 billion. 

For 2023, that number will grow to an expected $96 billion to $101 billion. That’s the big negative, since investors were hoping Meta would aggressively cut costs, said Neil Campling, an analyst at Mirabaud Securities. 
 

The company’s quarterly capital expenditure was more than all but 16 of the S&P 500 companies spent all of last year, according to Bloomberg data. 
 

Campling likened a buillish trade in Meta to IBM in 2005, saying “like IBM symbolizes dinosaur tech 1.0… so Meta faces the risk of being the next-generation fossil.”