Twitter influencers have remained upbeat over Meta Platforms Inc (NASDAQ:FB), with some believing it can recover and perform strongly in the short-term.
That’s despite the company having more than a quarter of its market value wiped off following poor fourth quarter and full year results announced last week.
Research from GlobalData, the analytics and consulting company, found that social media conversations surrounding Meta surged by 100% in the first week of February, compared to the week before.
Notably, the news release pointed out almost a third of tweets from influencers analysed, ranging from investors to senior editors, were seemingly confident that the Nasdaq listed company was only experiencing a minor blip, and a recovery in near term wasn’t unthinkable.
One tweet even went as far as saying that anyone doubting Meta, or Facebook, was either “trying to spook retail shareholders to sell so they can buy cheap stock or is emotionally unwell and shouldn't be on tv.”
But can the company, which is beginning its transition into a virtual reality focused business, and one that saw US$220bn wiped of its valuation in a day really turn it around in the short term like some of these ‘influencers’ think?
Well, if the latest results are anything to go by, it will be difficult.
Meta reported that users for its ‘Family of Apps’ business, such as Instagram and Facebook, was down for the first time in its 18-year history, and that is what seemed to worry investors more than anything.
For a company that has been heavily reliant on constantly growing its users to drive revenue, declining numbers is a worrying sign, as competition intensifies with video content rivals TikTok
Add to that rumours it may be forced to shut down Instagram and Facebook in Europe, owing to possible future legislation that makes data transfers between the different continents more difficult, Meta would be losing a sizeable chunk of its immediate money-making business.
Russ Mould, investment director at AJ Bell, added that the share price, down almost US$100 in a week to US$232, may be attractive for investors.
He does state, however, that “competitive pressures, regulatory scrutiny and reputational issues could all hobble the company’s near-term profit prospects.”
And all of this of course would be fine if its metaverse arm, Reality Labs, was making money. But it isn’t and isn’t likely to for a while.
That branch reported revenue of about US$2.3bn, which only accounts for about 2% of the company’s total income.
Couple that with Mark Zuckerberg himself believing it would cost about US$10bn annually to fully get Reality Labs off the ground and profitable, it looks like it will continue to rely on the old, seemingly on the decline business to fund the new, not yet profitable arm.
Mould added profits “are also likely to be crimped by ongoing heavy investment in Reality Labs and the metaverse.”
This is backed by Rachel Jones, an associate analyst at GlobalData, who said Meta’s virtual reality arm “will take at least another decade to really get going.”
Jones said “if Meta wants to keep its users and be in a better position to tackle the metaverse, the company needs to fix its core business model—develop its short-form video content and re-build advertising before ploughing more money into a currently non-existent metaverse.”
This isn’t the first time in recent history that Meta has promised big but under-delivered on a spin-off project of sorts.
It had launched its own crypto stable coin in 2019 called Libra, before being renamed to Diem, with the hope it would create more accessible financial services, with little to no costs.
However, it was forced to ditch that branch of the business just last week for US$182mln, following constant pressure from policy makers since it first launched the idea.
Meta clearly has much more invested into the Metaverse, the name change being the biggest giveaway, so is unlikely to give up so easily.
Jones adds that Meta is in it for the long haul with its metaverse project, but will need to “prove the value of the metaverse before investors get impatient. “