Facebook Desperate To Escape 66% Value Loss, Fond Memories of $1 Trillion Market Cap

Just a year ago, Facebook was boasting a market cap of $1 trillion, which put it squarely in the rarefied territory with a select few technology giants.

Fall From Grace

Today, Meta has lost around two-thirds of its value since its peak in September 2021. The stock trading has hit its lowest point since January 2019 and it is about to close its third quarter in a row with doubt-digit percentage losses. There are only four stocks that are having a worse go of it than Meta right now.

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Family Values

Facebook's platform is built on referrals. People invited their friends, family, and colleagues, and advertisers followed. The company's profits skyrocketed when this process was at its peak. These profits allowed them to hire the best engineers to keep the cycle going.

In 2022, however, this cycle has reversed. Users are quitting Facebook and advertisers, in turn, are reducing their spending. Businesses are also removing the Facebook login button from their websites. Recruiting has turned into a challenge for the company, especially since the CEO, Mark Zuckerberg, has turned his attention away from the social media platform and is pouring billions of dollars in resources into building the metaverse. He says he hopes the metaverse will be able to reach “a billion people” in a decade and that the platform will host “hundreds of billions of dollars of digital commerce.”

Very Unhappy Investors

The investors are not enthused, which makes sense considering most investors are impatient and want to see quick returns on their investments. They don't seem to be completely sold on waiting a decade for payouts that may or may not happen. Investors have already begun dumping their stock, which has some questioning if this stock drop is actually turning into a death spiral for the company.

Even with all of these odds stacked against it, Meta seems in no position to go out of business. They still hold a dominant position in mobile advertising, and they currently have one of the most profitable business models in the world. Even with the significant drop in stock value, the company managed to generate $6.7 billion in profit and ended the period with around $40 billion in cash and marketable securities.

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A Sorry Story

The issue for Facebook when it comes to Wall Street is that it is no longer a “growth story.” The company's slowest revenue year was obviously 2020 when everything was shut down, but analysts are predicting a revenue drop this year as well. The number of daily active users has fallen consistently in the U.S. and Canada in the last two years. Globally, however, user numbers have risen 10% and are expected to increase by 3% through 2024.

“I don't see it spiraling in terms of cash flows in the next few years, but I'm just worried that they're not winning the next generation,” said Jeremy Bondy, CEO of app marketing firm Liftoff.

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This article was produced and syndicated by Wealth of Geeks.