Meta is forced to reinvent itself to avoid decline

A year ago, before Facebook becomes Goal (GOAL)The company of mark zuckerberg had a market capitalization of 1 trillion dollarswhat situated her on select ground along with companies like Apple (AAPL), Alphabet (GOOGL) or Microsoft (MSFT).

Today, the present of Goal is totally different from the one that emerged at the end of 2021. Currently, The technology trades 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 stocks from the S&P 500 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 “mass economy” around digital goods.

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However, investors They are not enthusiastic about the technological universe proposed by the CEO of Meta, and the way in which are getting rid of stock makes some observed wonder if the pressure is down is actually a spiral from which Meta cannot recover.

What is behind Meta’s meager performance?

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

“This phenomenon has generated that the company see reduced ad 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 discouragement of the market

“This point is precisely central, as Facebook has ceased to tell a story of continued growthsituation that discouraged the market, despite the fact that it is still a company that reports almost US$ 7,000 million quarterly earnings,” said Vlassich.

Zuckerberg said in this regard that his company would be “something smaller” by the end of next year. “During the first 18 years of the companyWe basically 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 the future consumers that “They will not do it on Meta’s social networks”, he emphasized Vlassich. “So the challenge in the loss of users and therefore 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 MESS 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 activating an aggressive monetary policy with interest rate rises, the cost of financing becomes more expensive. This is clearly visible in the evolution of the cash item and balance equivalentswhich, as of the second quarter of 2021, totaled US$ 64,080 million, and the same, decreased by 46% in 9 months, totaling at the end of the first quarter of this year US$43.890 million”, he detailed.

Added to the above, the development of the Metaverse it is not clear not only by the adoption of the competition but because of the competition of projects in the blockchain that are more advanced, such as Decentraland. “Therefore, the other critical point is that Meta is wasting scarce resources and expensive with a project for which the end result is not clear,” he added. Vlassich.

What can be expected for the next few years from Meta?

“There is no doubt that The next few years represent a challenging scenario for the social network. will have to face greater competition, at the same time that it will seek the development of the Metaverse project in a context adverse for financing and trying to ensure that your finances are not affected“, ” answered Vlassich.

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

Should you invest in Meta shares taking advantage of its fall?

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

As updated PROFILE, Meta faces a major challenge, especially since Zuckerberg spends much of his time proselytizing the metaverse, that may well be the future of the companybut what No represents probably none of your short-term income and costing billions of dollars to build year.

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It should be clarified that it is not suggesting 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 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 plummeted in the last two years, from 198 million in mid-2020 to 197 million in the second quarter of this year. A world level, the number of users increased by 10% in that period and is expected to increase a 3% per year until 2024, according to estimates from Set of facts.

LR/MCP