Meta shares fall 24% on earnings decline, analysts downgrade

Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg demonstrates Meta Quest Pro during the Meta Connect virtual event in New York, U.S., on Tuesday, October 11, 2022.

Michael Nagel | Bloomberg | Getty Images

shares of Meta Plunged 24% Thursday morning as investors and analysts digested the company’s third-quarter earnings shortfall and a weak fourth-quarter outlook. Shares traded below $100 when the market opened, its lowest price since 2016.

Facebook’s parent company on Wednesday reported quarterly revenue of $27.7 billion, down more than 4% year over year and its second straight quarterly decline. Profits plummeted 52% to $4.4 billion.

Meta warned that the fourth quarter would be similar and issued a weaker-than-expected outlook. Fourth quarter revenue is expected to be between $30 billion and $32.5 billion. Analysts were expecting sales of $32.2 billion.

Meta CEO Mark Zuckerberg reiterated his commitment to spend billions of dollars developing the Metaverse. Meta’s Reality Labs unit, which is responsible for developing the virtual reality and related augmented reality technology that underpins its plans for the Metaverse, has lost $9.4 billion so far this year.

Morgan Stanley downgraded the stock on Thursday citing higher spending. Analyst Brian Nowak lowered his price target to $105 from $205. He expects the company’s troubles to persist as Meta continues to ramp up spending to expand its AI capabilities.

Cowen’s John Blackledge also downgraded Meta from “Outperform” to “Market Perform” and lowered its price target to $135 from the previous $205, citing the higher development of operating and capital costs. KeyBanc’s Justin Patterson lowered his rating on the stock to a sector weight from overweight, also citing rising costs.

Year-to-date, Meta shares are down more than 61%. It has been hurt by competition from rivals like TikTok, as well as a broad slowdown in online ad spending and challenges from Apple’s iOS privacy update.

– CNBC’s Michael Bloom contributed to this report.