Stocks tumbled to 19% on extended trading on Wednesday 4/24
Heavy losses of more than $200 billion in market capitalization were recorded by Meta, as shares tumbled as much as 19% in extended trading on Wednesday 4/24. Apparently Mark Zuckerberg's earnings speech, artificial intelligence, and advertising for headphones, glasses, and the operating system didn't excite investors.
The big drop came despite the fact that Meta reported better-than-expected first-quarter earnings and revenue.
Zuckerberg appeared ready for the selloff.
“I think it's worth pointing this out, that historically we've seen a lot of volatility in our stock during that phase of our product playbook where we're investing in scaling a new product, but we haven't capitalized on it yet,” Zuckerberg said. He cited previous efforts such as short-form video service Reels, Stories and the move to mobile.
Meta generates 98% of its revenue from digital advertising. But to the extent that Zuckerberg talked about advertising, he was looking toward the future and the ways the company could potentially turn its current investments into advertising dollars. Discussing Meta's effort to create a “top AI,” he said, “There are a number of ways to build a massive business here, including scaling business messaging, introducing ads or paid content into AI interactions.”< /p>
He spent time talking about Meta Llama 3, the company's newest major language model, and the recent release of Meta AI, the company's answer to OpenAI's ChatGPT, as reported by CNBC.
Expansion plans and new products
Zuckerberg then moved on to potential expansion opportunities in the mixed reality headset market, such as a headset for work or exercise. Meta on Monday opened up access to the operating system that powers the Quest headset, which Zuckerberg said will help the mixed reality ecosystem grow faster.
He also talked about Meta's AR glasses , which he called “the perfect device for an AI assistant because you can let them see what you see and hear what you hear.”
Meanwhile, Meta's Reality Labs unit, which houses the company's hardware and software for developing the fledgling metaverse, continues to bleed cash. Reality Labs reported first-quarter sales of $440 million and a loss of $3.85 billion. The segment's cumulative losses since the end of 2020 have exceeded $45 billion.
Meta's share price nearly tripled last year and, as of Wednesday's close, was up 40% in 2024. It reached to a record high of $527.34 in early April.
After a brutal 2022, during which the company lost about two-thirds of its value, Zuckerberg appears to have regained the confidence of Wall Street.
A driver for the rally was a cut plan costs set in motion by Meta's CEO early last year when he told investors that 2023 would be the “year of efficiency.” The company has cut staff and eliminated redundant projects in an effort to become a “stronger and more agile organization”.
Zuckerberg said Wednesday that Meta will continue to operate effectively, but that shifting existing resources to AI investments will “significantly increase our investment pool.”
Capital spending for 2024 is expected to be between $35 billion and $40 billion, an increase from a previous forecast of $30 billion to $37 billion “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” Meta said.
Zuckerberg said he expects to see a “multi-year investment cycle” before Meta's AI products turn into profitable services, but noted the company has a “strong track record” in this segment. .
Meta's chief financial officer, Susan Lee, echoed Zuckerberg's comments, saying the company needs to develop advanced models and scale products before they can lead to significant revenue.
< p>“While there is tremendous long-term potential, we're just very early on the yield curve,” Li said.
Even before the call began, investors were shorting the stock. That's because Meta posted a light second-quarter revenue forecast, eclipsing its better first-quarter result.
As the stock's slide intensified, Zuckerberg told investors that if they were willing to follow along the way, they may be rewarded.
“Historically, investing in building these new scalable experiences into our apps has been a very good long-term investment for us and for the investors who stayed with us and the early signs are quite positive here as well,” said Zuckerberg. “But creating a top AI will also be a bigger undertaking than the other experiences we've added to our apps, and that will probably take several years.”
source: newmoney.gr
