Today the view looks much different. Meta has lost about two-thirds of its value since peaking in September 2021. The stock is trading at its lowest since January 2019 and is about to close out its third straight quarter of double-digit percentage losses. Only four stocks in the S&P 500 are having a worse year.
Facebook’s business was built on network effects — users brought their friends and family members, who told their colleagues, who invited their buddies. Suddenly everyone was convening in one place. Advertisers followed, and the company’s ensuing profits — and they were plentiful — provided the capital to recruit the best and brightest engineers to keep the cycle going.
But in 2022, the cycle has reversed. Users are jumping ship and advertisers are reducing their spending, leaving Meta poised to report its second straight drop in quarterly revenue. Businesses are removing Facebook’s once-ubiquitous social login button from their websites. Recruiting is an emerging challenge, especially as founder and CEO Mark Zuckerberg spends much of his time proselytizing the metaverse, which may be the company’s future but accounts for virtually none of its near-term revenue and is costing billions of dollars a year to build.
Zuckerberg said he hopes that within the next decade, the metaverse “will reach a billion people” and “host hundreds of billions of dollars of digital commerce.” He told CNBC’s Jim Cramer in June that the “North Star” is to reach those sorts of figures by the end of the decade and create a “massive economy” around digital goods.
Investors aren’t enthusiastic about it, and the way they’re dumping the stock has some observers questioning if the downward pressure is actually a death spiral from which Meta can’t recover.
“I’m not sure there’s a core business that works anymore at Facebook,” said Laura Martin of Needham, the only analyst among the 45 tracked by FactSet with a sell rating on the stock.