Just when it was going so well.
Between them, the five companies which comprise some 23% of S&P 500 market cap added more than $850 billion in value from the lows hit late last month through midday Wednesday.
The remarkable turnaround illustrated in the figure on the right (below) came just as investor skepticism towards perennial secular growth favorites crescendoed on the heels of a 50bps leap in US real yields, which undermined a previously bulletproof bull case.
Wednesday’s closing bell marked the fourth consecutive daily gain for big-cap US tech. It’s been a good run (figure on the left, above).
Alas, the metaverse spoiled the party on Wednesday evening. The company formerly known as Facebook (and now formally known as Meta Platforms) missed on pretty much every metric that matters, prompting an egregious plunge on par with the infamous July 2018 collapse.
Q4 revenue managed a small beat, but Q1 top line guidance was well short of consensus. Meta expects $27 billion to $29 billion in revenue in the first quarter. The market wanted to hear $30.3 billion.
The company lost more than $10 billion in its Reality Labs division in 2021, including a $3.3 billion operating loss last quarter alone. The division includes augmented and virtual reality related consumer hardware, software and content.
Daily active users on Facebook missed, and there was no sequential growth in monthly users on the social network.
The figure (below) shows you how bad things could get assuming Wednesday’s after hours losses manifest in regular trading on Thursday.
As things stood on Wednesday evening, Facebook was staring at a potential ~23% one-day decline, which would represent the single-worst post-earnings drop since the IPO a decade ago.
In market cap terms, that would equate to around $200 billion in a single day.
Needless to say, that could easily torpedo the rebound in mega-cap US tech and would weigh (heavily) on the “broader” market, precisely because the broad market isn’t very “broad” in the US (recall the figure on the right, below, from JPMorgan).
Invariably, Facebook’s (near certain) Thursday plunge will trip up the rest of the heavyweights. Google, which had a stellar post-earnings rally, was down nearly 2% on the heels of Facebook’s results.
Mark Zuckerberg isn’t deterred. He called the quarter “solid.”
“I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce, and virtual reality,” he said, adding that the company will “keep investing in these and other key priorities in 2022 as we work towards building the metaverse.”
Ecb is really make or break now…
Rumor in the NFT vines is that Facebook/Meta is planning an acquisition of Sanbox, a popular virtual land in Ethereum. When I heard about it I thought it was baseless speculation but after the earnings disaster today I would not be surprised to see a desperation move out of Zuck, his monster child is falling behind in every metric that counts.
Even after the drop, Facebook looks expensive. Pricing it is like pricing oil companies: it’s profitable but you know the party is not going to last.
@H it appears, if the FANG has lost a tooth, you may well be acquainted in varying degrees with others that have ‘lost’ $30k. I had a hearty laugh some days ago when you picked that absolute dollar amount as some sort of meaningful signifier delimiting the “‘merely’ rich” from the “wealthy.” With market participants, organic and otherwise, now primed to panic first and reflect later it may be time to modify the old saw about ‘waiting to buy until there is blood in the streets’ to ‘waiting to buy until the storm drains are choked with clotted gore.’ But hey, I’m a worm, and worms got to eat too. If your scenario takes the sad hollow carcass of FB’s hyped-up Meataverse meme and strangles it in the crib before it grows, then Humanity, not just U.S., will have temporarily dodged another big-tech bullet. If America still had any shreds of anti-trust and anti-competitive muscle memory left we wouldn’t find ourselves dreading/reaping the consequences of the “23%” folly. Live and re-Learn.
Wishful thinking, but it is nice fantasy just the same, to imagine the FB and PYPL CEOs got a serving of karma today. In the meantime let’s all have a look at those ad revenues again 😉
If that was “solid” what is the opposite of solid? And what sort of sell-off would that entail? I often wonder which company of these will disappear first: FB, AMZN, GOOG, NFLX, MSFT, TSLA….Historically you do see top peformers disappear or go flat for a decade, think MSFT in 2000s, or Circuit City or Enron ect…
Zuck lies, that’s what he’s been doing. He knew he sold customer data to a firm that handed it over to the Russians. He new that women were being sold on his platform. He knows that his platform is best monetized by spreading hate and misinformation. All of his pretending to not know and trying to fix it are lies.