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Meta, formerly known as Facebook, faced a significant setback as its shares plummeted by 12% on Thursday morning. The drop came after the company issued a disappointing revenue forecast, overshadowing its first-quarter earnings, which beat expectations.
The company reported earnings per share of $4.71 on a revenue of $36.46 billion, surpassing the expected earnings of $4.32 per share and revenue of $36.16 billion, according to LSEG. However, the stock took a hit, trading at around $430 at 11 a.m. ET, wiping out approximately $161 billion in market capitalization from its $493.5 closing price before Wednesday's earnings.
The sell-off continued into extended trading on Wednesday after CEO Mark Zuckerberg discussed investments in areas like artificial intelligence and mixed reality, which are not currently profitable.
For the second quarter, Meta expects revenue between $36.5 billion to $39 billion, falling short of analysts' average estimate of $38.3 billion with a midpoint of $37.75 billion.
Despite the setback, JPMorgan analysts reiterated their overweight rating of Meta, though they reduced their price target to $480 from $535. They highlighted Meta's virtual ownership of the social graph, its strong competitive moat, and its focus on user experience, positioning it as an enduring blue-chip company.
Analysts at Bernstein, maintaining an outperform rating on Meta shares, lowered their price target to $565 from $590, characterizing Meta's current business strategy as an "expensive offensive" with a longer payback.
Similarly, Barclays analysts retained an overweight rating on Meta stock, reducing their price target to $520 from $550. Despite expecting a "bumpy ride" for the remainder of 2024 as revenue growth rates decelerate, they emphasized Meta's historical ability to execute during significant tech platform shifts.
Meta's recent stock plunge reflects investor concerns over its weak revenue outlook despite a strong first-quarter performance. While analysts express confidence in Meta's long-term prospects, the company's heavy investments in areas like artificial intelligence have raised doubts about short-term profitability. As Meta navigates through this challenging period, its ability to execute its long-term strategy will be crucial in maintaining investor confidence.
