Shares in Facebook owner Meta fell 20 percent in US premarket trade on Thursday after the social media giant issued a dismal forecast, blaming Apple’s privacy changes and increased competition.
The huge drop, which comes before Amazon earnings later in the day, spilled over to Europe, where technology stocks posted some of the steepest declines and soured the mood across global financial markets in another busy day of central bank meetings.
Meta was set to lose a fifth of its market value, erasing about $200 billion. If the premarket losses hold, a decline of this size in Thursday’s session would mark the company’s worst one-day loss since its Wall Street debut in 2012.
“Meta CEO Mark Zuckerberg may be keen to coax the world into an alternate reality, but disappointing fourth-quarter results were quick to burst his metaverse bubble,” said Laura Hoy, an equity analyst at Hargreaves Lansdown.
Big US tech companies have come under mounting pressure in 2022 as investors expect policy tightening at the US Federal Reserve to erode the industry’s rich valuations following years of ultra-low interest rates. The tech-dominated Nasdaq fell more than 8 percent in January, its worst monthly drop since the end of 2019.
“The downgrade in the earnings outlook by Meta and other companies took markets by surprise,” said Kenneth Broux, a strategist at Societe Generale in London.
“The tech selloff spilled over to broader equity markets this morning and with the Fed preparing to raise interest rates, we could see more volatility going forward,” he said.
European technology heavyweights ASML, Infineon and SAP were among the shares weighing the most on the region’s STOXX 600 equity benchmark, in what traders viewed as a kneejerk reaction to the Facebook tumble. Infineon was also penalized by a conservative outlook.
Meta reported a decline in daily active users from the previous quarter for the first time as competition with rivals like TikTok, the video sharing platform owned by China’s ByteDance, heats up.
Meta said about 3 percent of worldwide monthly active users in the fourth quarter consisted solely of violating accounts while duplicate accounts may have represented about 11 percent of usage.
The disappointment over Meta’s earnings and the subsequent stock fall raised memories of the bursting tech bubble in 2000.
Investors seem to be becoming highly selective after the sector’s record-breaking run in recent months.
According to research firm Vanda, purchases from retail investors in late 2020 and early 2021 were focused on expensive tech, EVs and so-called “meme” stocks. In the past week purchases of large-cap tech have skyrocketed while speculative assets have seen very little demand.
The so-called FAANG group of Facebook, Amazon, Apple, Netflix and Google’s Alphabet has seen around $400 billion in market capitalization wiped off in the opening weeks of 2022 as cheaper segments of the markets become more attractive while central banks taper stimulus.
Other social media stocks were also hit hard in pre-market trading on Thursday, including Twitter, Pinterest and Spotify. Spotify has been beset by a row over COVID vaccination misinformation and also released disappointing results.
Stocks futures for the Nasdaq fell as much as 2.4 percent on Thursday.