Shares of Meta, parent of Facebook plunged nearly 27% on the 3rd (local time), causing a big shock to the U.S. stock market, with its market capitalization evaporating $251 billion.
Facebook closed its regular market at $237.76, down 26.39% from the previous trading day.
The plunge in Facebook’s stock price is attributed to a decrease in active users of disappointment in performance, a decrease in advertising due to changes in Apple’s IOS (embedded operating system provided by Apple), and a hasty entry into Metaverse.
Four Major Reasons of Meta Market Capitalization Plunge
Disappointing Quarter Earnings
Meta said in its earnings announcement the previous day that its net profit per share in the fourth quarter of last year was $3.67. This is below the estimate ($3.84). Sales were also $33.67 billion, below expectations of $33.4 billion.
Sales forecast for the first quarter fell short of expectations. Facebook expects sales to be $27 billion to $29 billion in the first quarter. This is lower than the Wall Street forecast of $30.15 billion.
Decreasing active users for the first time since its launch
Meta admitted in its earnings announcement that the number of active users stood at 1.929 billion in the fourth quarter, down slightly from 1.93 billion in the previous quarter. It is the first time in Facebook’s 18-year history that the number of active users has decreased compared to the previous quarter.
As competition with competitors such as TikTok and YouTube intensifies, Facebook’s growth has entered a stagnant phase, with subscriber expansion stopping.