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Meta Platforms recently experienced a stock drop of 26% in one day which is the largest one day drop in history. This happened because of a recent earnings report from Meta where they slightly missed expected earnings and did not grow as much as expected. Facebook earning less than expected should not have been a surprise at all. With Apple's recent privacy change that lets users opt out of having their data harvested, it makes sense that Facebook would experience a decrease in ad spend on the platform.
For years now, people have tried to get Facebook to change its business model of advertising through harvested data, but I think this perfectly shows why this business strategy is successful. Now that Apple has forced Facebook to have less data, their missing their earnings target.
Facebook missing expected growth is a bit more alarming than missing the earnings target for me. This could be because parent company Meta is more interested in other projects besides Facebook right now and that this is the consequence of that. It's no secret that Meta sees a lot of long-term potential in services like Virtual Reality and Augmented Reality, hence the name change, and this could have made them focus on Facebook growth less.
A 26% drop, however, makes no sense at all based off of this information though. Facebook, while falling short of expectations, is still growing. They currently have 2.9 billion people using at least one of their services every single month. That is insane. That is a lot of people to advertise to, and with that number alone, they deserve a trillion dollar valuation not the 645 billion dollar valuation that they have now with the pull back. With this many people on their platforms, a 645 billion dollar valuation makes no sense at all.
Also, with regards to earnings falling short of expectations, this is largely due to Apple's changes. While this is a big deal for Facebook, these changes effect every advertising based business. If businesses want to advertise online, and they do, they are still going to have to use Facebook to do so because even with Apple's changes they're the cheapest way to advertise and get results. They're still the best at advertising. Even if ads are now less effective, they're still more effective on Facebook than any other platform.
Meta is now a high growth tech company with a p/e ratio of 17 which could be an extraordinary opportunity for investors.
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