How Did Wall Street Get Meta’s Earnings So Wrong?
Only two analysts, both in Europe, rated Facebook’s parent company a sell before it recorded the biggest-ever drop in market value.
If you have a teenager in your house, you’ve known for a while that the Facebook app isn’t as cool as it used to be. Even so, Wall Street has held its parent company, renamed Meta Platforms Inc. last year, in the highest esteem. For years, analysts’ price targets kept climbing, at times implying double-digit returns. Growth estimates suggested little to worry about. Until Feb. 2 anyway.
On that day, the two story lines—the popular one about a company losing its edge with young consumers and the one among investors about an unstoppable tech colossus—crashed into each other. Meta reported the first-ever quarterly drop in Facebook’s daily active users. It’s getting stiff competition from video-sharing apps such as TikTok. That, combined with slower revenue growth in the current quarter than analysts had expected, resulted in a 26% plunge in the share price on Feb. 3, wiping out $251 billion from the valuation of Meta. It was the biggest one-day dollar drop in market history—though the company is still the eighth most valuable in the U.S. at about $631 billion.