Meta Platforms' stock price continues its drastic sell-off. The company is being weighed down by costly product launches related to the Metaverse trend and a weakening advertising segment:
- Meta Platforms shares have seen the biggest sell-off of all, five US 'BigTech' companies since the fall of 2021. Meta is struggling with increased competition from other platforms like TikTok and Snap;
- Meta Platforms reported a headcount of 83,553 at the end of Q2, up 32% from a year ago. The company now plans to cut costs by 10% mainly through layoffs. Alphabet, Amazon and Netflix have also followed this path;
- The global technology market is experiencing declines, and the global recession could further choke off demand for new devices, whose cost of production is rising. Uncertainty is also coming from the semiconductor manufacturing sector, and without free access to chips, it will not be possible to mass-produce some chips like the Oculus;
- High inflation is causing societies to redirect spending toward the most necessary products and the tech market is suffering as a result. The current trend is also a 'salt in the eye' for the company's growing Metaverse trend, which pushed CEO Mark Zuckerberg to marketingly change the company's name last fall. However, the multibillion-dollar spending on the development of virtual worlds technology seems unlikely to pay off under current macro circumstances, as investors are now pricing in;
- Increased spending on a new, uncertain business segment has made Meta's shares perceived as riskier compared to its competitors, resulting in a negative volatility spike in this case. The company's valuation has fallen nearly 65% since the beginning of the year, compared to 'only' 15% declines for Apple;
- The stock sell-off caused Mark Zuckerbeg's fortune to 'melt away' by $71 billion, to $55 billion. The billionaire was ranked the 20th richest person in the world - the lowest since 2014.
Meta Platforms (META.US) shares, D1 interval. The company continues its downward trend, with the share price at the March 2020 oversold levels and close to the 2018 lows, which may herald an upcoming rebound. The RSI near 31 points is in an area that has proven to be a suitable place to buy in the past. Valuation is looking better and better on the fundamental side, with the P/E ratio approaching the vicinity of 11 points, which is twice as low as the average for NASDAQ index companies. The price-to-book ratio is also looking better, at just above 3, compared to the 4.9 average. Meta Platforms' business, on the other hand, has never faced such significant problems and weakening revenues. However, high interest rates and the vision of an economic slowdown could lower analysts' bets for Meta Platforms' stock price. If the company shows that it will be able to meet the challenges in the new macroeconomic circumstances, the current valuation could prove attractive to contrarian investors. Source: xStation5
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