From January 2021 to early 2022, big names in tech took a deep dive, with companies like Facebook/Meta, Netflix, Shopify, PayPal, Zoom, and Square leading the plunge. These companies have lost more than $1.1 trillion in market capitalization from their peaks during 2021, per analysis by A Wealth of Common Sense, a blog written by Ben Carlson, a manager at Ritholtz Wealth Management, LLC. Their performance calls into question what’s ahead for the tech world, both for individual firms and the industry at large.
After Facebook/Meta reported lower-than-expected fourth-quarter earnings in 2021, the company dropped nearly $237 billion in market capitalization the following day, the biggest one-day loss for a publicly traded company in the history of the stock market. The drop pulled down shareholders and impacted founder CEO Mark Zuckerberg’s net worth. Zuckerberg has been booted off of the top 10 list of the Bloomberg Billionaire Index as a result.
A combination of dependency, competition, and the unknown may be behind Meta’s troubles. “Of all the large tech stocks, Meta is by far the most dependent on other companies to distribute its product,” Ryan Maxwell, CFO at FirstRate Data, a high-frequency financial data provider, told The Epoch Times. It doesn’t have a hardware or operating system in which it can bundle its products. Compare that to Google, which has Android; Microsoft, which uses Windows; or Apple, which has the iPhone, iPad, and Mac.
“This makes it extremely vulnerable to platform decisions by other companies,” Maxwell added.
In the last earnings report, Meta disclosed that Apple’s new iOS tracking policy would cost $10 billion in lost revenue. “The Apple policy allows the user to deny access to the application,” Christian Velitchkov, co-founder of Twiz, LLC, a full-service digital marketing agency, told The Epoch Times. Many consumers are opting out and not allowing access. “As a result, Facebook is not able to retain the user data for personalized ads,” Velitchkov said. “This is hurting their marketing.”
While Meta was considered to have a stronghold on large-scale social networks in the past, other up-and-coming companies are gaining their footing. Twitter and Snap, along with others, are making their name in the arena. “In the latest earnings report, it became clear that TikTok is now a large-scale competitor [of Meta],” Maxwell said. Zuckerberg reportedly told employees that the company faces ‘unprecedented’ competition from TikTok.
Lack of trust and awareness may be at play too, especially as Meta moves forward in the virtual reality (VR) space. “Meta is still relatively new and most people don’t fully understand it,” Velitchkov said. The Federal Trade Commission and other bodies have launched investigations to explore the new forays. The studies have looked at how Meta could be implementing anti-competitive practices and using its girth to drown out others in the VR space.
Questions are surfacing about what the next months will bring for tech, based on Meta’s woes along with global uncertainties like supply chain issues and Russia’s invasion of Ukraine. “We’ve seen tech stocks slowly dropping in value since the beginning of this year,” Johannes Larsson, CEO of Financer.com, a business in the financial services sector, told The Epoch Times.
Recent fluctuations may not equate a downward spiral over the long-term, however. “These companies aren’t going anywhere, and they’ll bounce back as they’ve always done in the past,” Larsson said.
Even if there is an upward trend on the horizon, it can be tough to lay out a timeline. Cycles of boom and bust, while common in the tech world, have not historically followed a linear path. It can take more than a decade for stocks to recover, as seen in previous performances of big players. Microsoft’s stock hit an all-time high in 1999, at nearly $60 per share. Shortly after, it tumbled and stayed down, ultimately returning more than 16 years later to its previous share price.
Other company stocks, like Cisco and Intel, plunged in the early 2000s after hitting all-time highs, and still haven’t fully recovered. Cisco closed on March 27, 2000, at a record of $80 a share. As of March 28, 2022, the average Cisco stock price for the previous year was nearly $55. Intel closed at nearly $75 a share on Aug. 31, 2000. And its average price for the previous year was just under $55 on Feb. 28.
For investors, the low price of Meta stock could present a good investment opportunity, but it could take a while to see the price re-gain previous highs, according to Larsson. For that to happen, the stocks would need to eventually recover—a future that, as we know, remains unseen.
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