Why Is There a Major Selloff of Meta Platforms Stock?

Meta Platforms (META) stock is down 13.68% today, losing 68 points after a rough earnings report was released.

It is estimated that the company may have lost as much as $200 billion of its market value in the drop. Meta Platforms is the parent company of Facebook, and they warned investors that AI costs are rising, which could contribute to lower profit margins for the company.

Meta gave a muted forecast for the rest of 2024 and the upcoming quarter even while announcing better than expected sales. The company brought in $36.5 billion in revenue for the first quarter of 2024, which was above expectations. They also enjoyed earnings of $4.72 per share, which beat expectations as well.

With that kind of good news, the company was poised to have a very good quarter and see its stock shoot up. However, the company chose to use these high numbers as a launching point for a very reserved forecast not just for this year but for the next few years.

Meta Platforms’ Big Plans

Meta announced that it would be investing in some big projects for a while that would pay off later on down the road. CEO Mark Zuckerberg said that the company was planning major increases in spending and would be pouring capital into projects that could take years to earn a profit.

That caused a sharp decline in stock price and hurt those who had invested in Meta Platforms and were expecting their purchases to pay off this quarter. Meta is playing a long-term game, though, and they are positioning themselves to earn back their investments and then some over the next few years.

This means that Meta Platforms is a risky investment right now and may not show short-term gains right now. However, Meta’s gamble could pay off later on and prove to be a worthwhile investment in late 2024 or early 2025.

ABOUT THE AUTHOR See More

Timothy St. John

Financial Writer - European & US Desks

Timothy St John is a seasoned financial analyst and writer, catering to the dynamic landscapes of the US and European markets. Boasting over a decade of extensive freelance writing experience, he has made significant contributions to reputable platforms such as Yahoo!Finance, business.com: Expert Business Advice, Tips, and Resources - Business.com, and numerous others. Timothy's expertise lies in in-depth research and comprehensive coverage of stock and cryptocurrency movements, coupled with a keen understanding of the economic factors influencing currency dynamics. Timothy majored in English at East Tennessee State University, and you can find him on LinkedIn.

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