FB Stock Dips Over 26% after Meta Forecasts Weaker than Expected Earnings

JPMorgan analysts downgraded FB stock from overweight to neutral on Thursday and lowered their price target from $385 to $284.

FB stock shed over 26% on Thursday, wiping out more than $230 billion in market cap, after Meta Platforms Inc (NASDAQ: FB) forecasted weaker than expected earnings for the coming quarters. Additionally, the social media giant reported weaker than expected Q4 earnings results.

According to market data provided by MarketWatch, FB shares traded around $241.50, up approximately 1.57%, during the extended trading period. Following the dip, the company is valued at approximately $898.51 billion.

During the fourth quarter, the company recorded earnings per share of $3.67 on revenue of $33.67 billion. However, according to a survey conducted by Refinitiv, analysts expected the company under its new name to report earnings per share of $3.84 on revenue of $33.4 billion.

Further, Facebook reported Daily Active Users (DAU) of 1.93 billion against 1.95 billion estimated by analysts according to a survey by StreetAccount. The company also missed its Monthly Active Users (MAUs), whereby it recorded 2.91 billion against 2.95 billion expected by analysts.

Following the mixed Q4 earnings results, some analysts downgraded the Facebook stock and also changed their price targets. For instance, JPMorgan analysts downgraded the Facebook stock from overweight to neutral on Thursday and lowered their price target from $385 to $284. The analysts said Meta “is seeing a significant slowdown in advertising growth while embarking on an expensive, uncertain, multiyear transition to the Metaverse.”

FB Stock and the Market Outlook

Facebook stock has been on a downward trend for the past year, with losses expected to extend this year. According to market data provided by MarketWatch, FB shares are down approximately 11.32%, 29.31%, and 30% in the past year, YTD, and three months respectively through Thursday.

Having been rated 50 times in the recent past, FB shares received an average rating of Over. Additionally, the company received an average recommendation of Overweight and an average price target price of $339.40.

Forward, the company is facing more uncertainty and increased headwinds, particularly due to increased competition and also  Apple’s advertisements policy.

“It’s not a major surprise that core blue is maturing and TikTok is gaining traction among the younger demographic – but following what was one of the roughest Meta conference calls in years, we think investors may start to question whether team Zuckerberg can salvage any growth out of FB, or whether the asset that represents ~2/3rds of revenue is in secular decline mode,” Barclays analyst Ross Sandler wrote.

CNBC’s Jim Cramer is however optimistic about the company’s ability to turn around and record higher returns in the future as the company did in the past.

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Steve Muchoki

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