Meta/Facebook 'faceplant' set to wipe out most equity value ever
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Facebook parent Meta Platforms (NASDAQ:FB) is down 25% off Wednesday's disappointing earnings report - erasing more than $220 billion in market value, the biggest single-day equity wipeout ever.
That's assuming that the decline holds, with volatility high and (as always) the chance for a substantial rebound later in the day. Meta's nosedive is leaning on the market at large - the S&P 500 is down 1.5%, and Nasdaq down 2.3% - and it's an especially painful slap in the face for tech investors who thought they could pile back into the sector after a January correction (particularly after some outlier positive reports from Apple and Alphabet).
"The worst equity tumble ever" wouldn't be the first major drop for Meta, which slid 19% in July 2018 (that $120 billion market-cap drop was a record at the time).
It's a particular pain, though, for long-only equity funds, where Meta ranks among the top two holdings - one of the few megacaps that those funds like. Those large-cap fundamental funds manage a collective $1 trillion-plus in assets.
Mark Zuckerberg's personal wealth may not be the top concern for Meta's wounded investors, but he's lost some $31 billion today as well. His comments during the company's earnings conference call were under scrutiny, and two key takeaways from that: He's now acknowledging the cost of heavy competition from TikTok (BDNCE), and spoke extensively about Meta's Reels short-video offering as the heavy focus in response to that threat.
On the other hand, how are Meta's short sellers doing? Those bettors on a Meta Platforms decline are set to boost potential 2022 gains by some $1.72 billion in mark-to-market profits, to more than $2 billion for the year so far, S3 Partners says.
Analysts were forced to respond to the report, slashing price targets across the board - though many kept their bullish ratings on (and beforehand, they had already essentially spoken as a chorus with Buy ratings).
J.P. Morgan did cut to Neutral from Buy, its first downgrade of the stock since Facebook's initial public offering.
Loop Capital also cut to Hold and set a $230 price target - a Street low. Raymond James trimmed back some extreme bullishness, downgrading the stock to Outperform (from Strong Buy) with a $340 target. The firm said shares look attractive at 13x core EPS (that cuts out the heavy losses in Reality Labs/VR) vs. 10% long-term EPS growth. It's still expecting solid long-term ad growth of 10%-plus, and continued monetization of newer platforms and formats (Reels foremost there).
Of the new price targets, the deepest cut may be from KeyBanc - which is staying Overweight but cut target to $280 from $420; today's slide means the $280 implies 15% upside.
Meanwhile, though Meta is weighing on the entire market, social media peers have been feeling the brunt since milliseconds after Meta's report. Today Twitter (NYSE:TWTR) is down 5.1%; Pinterest (NYSE:PINS) a hefty 8.1% lower, and Snap (NYSE:SNAP) feeling the real pain, down 20.5%.
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FB Share Price: $315 on 10/26/21 (Day After Earnings Report)
Analysts: "We reiterate FB stock as a 'Buy'."Three months later...FB FCF in Q4 (Dec '21): $4.48/share
FB Share Price: $236 on 02/03/22 (Day After Earnings Report)
Analysts: "Buy FB? Meh..."So to recap...FCF/sh increased 29% Quarter over Quarter, FB is more attractively valued today, and Wall St. is a big ole "Meh" on it.Brilliant.Long $FB/META and accumulating!
