META Stock Plunges 19% After Disappointing Q1 2024 Results

META Stock Plunges 19% After Disappointing Q1 2024 Results

After the earnings call on Wednesday, April 24th, META’s stock price took a sharp nosedive, plummeting nearly 19% and wiping out over $200 billion in market capitalization for the company.

META, the parent company of Facebook, is feeling the financial strain of its ambitious venture into the Metaverse, as evidenced by its Reality Labs unit reporting staggering operating losses of $3.85 billion for Q1 of 2024. This financial burden is exacerbated by the stiff competition Meta faces from industry giants like Apple in the virtual reality market.

Despite the Metaverse division reporting a revenue increase of nearly 30% to $440 million for Q1, this figure represents only a modest 1% of Meta’s total sales during the same period. Analysts had anticipated even higher losses at $4.31 billion, with sales reaching $512.5 million for Q1 2024.

Since Meta began separately reporting the financials of its Reality Labs division at the end of 2020, total losses have soared past $45 billion, underscoring the high costs associated with developing Metaverse technology.

Meta’s CEO Mark Zuckerberg remains optimistic about the Metaverse, dubbing it the “next frontier.” However, the current endeavor to develop this technology proves to be a costly one. Moreover, Meta faces challenges in fending off competition, particularly from Apple’s Vision Pro, which poses a threat to Meta’s Quest V3 headsets.

Earlier this week, Meta announced a collaboration with third-party hardware manufacturers to develop new VR headsets utilizing the Meta Horizon operating system, which powers its Quest headsets. Zuckerberg emphasized Meta’s commitment to an open model in contrast to Apple’s closed ecosystem dominance in the phone market, positioning it as the future of computing.

In response to the drastic drop in META’s stock price following the Q1 2024 report, Zuckerberg acknowledged the historical volatility of the company’s stock during phases of product scaling without immediate monetization. He pointed to past successes such as the transition to mobile and the introduction of short-video service Reels. While digital advertising constitutes 98% of Meta’s revenue, Zuckerberg primarily focused on future prospects for advertising revenue.

Furthermore, Zuckerberg highlighted Meta’s efforts in developing leading AI technology, exploring avenues such as scaling business messaging and integrating ads or paid content into AI interactions. He also mentioned Meta’s latest large language model, Meta Llama 3, and the rollout of Meta AI, positioning it in competition with platforms like OpenAI’s ChatGPT. Additionally, Zuckerberg discussed Meta’s AR Glasses as an ideal platform for AI assistants due to their ability to perceive surroundings and interact accordingly.