Facebook Stock Drop: The Reasons Behind the Recent Rapid Decline

Recently, the stock of the well-known social media giant, Facebook (now called Meta), has experienced a significant drop, which has attracted considerable attention from both the investment community and the general public.

Quarterly Earnings Report and Revenue Growth

According to the latest quarterly earnings report, Facebook's general income for the three months to December saw a notable increase, reaching 33.7 billion dollars compared to 28.1 billion in the same period last year. However, net gain, a significant indicator of profitability, dropped to 10.3 billion dollars, a decrease of nearly one billion dollars from the previous quarter. Despite these fluctuations, Meta remains a highly profitable and robust business, showcasing its resilience and financial strength.

Declining Users and Rising Expenses

The stock decline is largely attributed to the company's dismal quarterly earnings report, which highlighted the company's declining user base and increasing expenses, particularly those associated with the development of its metaverse project. Mark Zuckerberg, the CEO of Meta, has realigned the company's resources towards building out his vision of the metaverse, committing over ten billion dollars last year. For 2022, the company anticipates a meaningful increase in similar expenses, further straining its profitability in the short term.

Increased Competition and Regulatory Concerns

The rapid decline in Facebook's stock is also exacerbated by increased competition, particularly from TikTok, and changes in Apple's iOS platform that impact advertising strategies. These factors, combined with the growing investment required for the metaverse project, are expected to negatively affect the company's earnings in the near future. As of now, the stock has recovered to 50 percent of its fall, and it currently faces a precarious situation, caught between the fear of further government regulation and the continued potential for good earnings.

Leadership Criticism and User Anxiety

The stock drop has also led to criticism of Mark Zuckerberg's leadership, with some questioning whether his vision of the metaverse is feasible and strategic. There are concerns that various unresolved scandals may impact ad revenue. Furthermore, there is uncertainty regarding whether Facebook should be treated as a media company, leading to potential changes in regulatory standards and public skepticism about the company's future.

Another critical factor driving the decline is the increasing user disinterest. More and more people are leaving Facebook, indicating a shift in user preferences. Additionally, the company has faced significant security issues, including hacking and leaks of private photos, raising concerns about user privacy and data security. These incidents have eroded trust among users and further contributed to the decline in stock value.