in the Metaverse?

Meta Platforms, Inc., formerly known as Facebook, took a tumble last week as its shares fell a shocking 6.7%. The company’s disappointing third quarter report is a result of this mega-corporation’s massive spending which has deeply concerned investors. What, exactly, is happening in the metaverse? Let’s take a look.

Investors are Losing Faith

Mark Zuckerberg changed the name of Facebook’s parent company to Meta Platforms in October of 2021. This was done to incorporate other media platforms they had purchased under one corporate umbrella, such as Instagram and WhatsApp. Since the decline of MySpace years ago, Facebook has dominated the public square as the world’s go-to social media platform. This made the company seem bulletproof and unstoppable with investors.

Today, however, that is not the case. Meta is in the middle of a rebranding campaign, to become a company that builds and provides technologies which connect people and help businesses to grow. Due to this rebrand, Meta has been pouring money into research and development, to the tune of several billion dollars. 

Even with their recent spending, there isn’t much to show for it, which makes investors question whether or not they want their investments to tank along with the company. But is Meta Platforms truly tanking?

Is Meta Going Under?

Throughout the whole of 2022, Meta’s stock has fallen sharply, a staggering 73%. It would seem the company is in freefall. Spooked investors are pulling out as fast as they can, and those who are brave enough to stay are not impressed with current projections for the next quarter and beyond. In order for Meta to vastly expand their AI capacity, they need to spend like never before. However this spending ensures profitability for the long term becomes less and less likely. 

Mark Zuckerberg’s vision to rebrand his company and take it to the next level, with hardware such as face-tracking, is a gamble for sure. If this vision of his does not pay off, it is altogether possible that Meta might actually tank as investors fear. However, Facebook alone, while being abandoned in droves by users for other social media platforms, is still a formidable source of ad revenue. If Meta does end up tanking once and for all, it will circle the drain for a good, long time.

Should You Be Worried?

In a nutshell, if you’ve invested in META stock, it’s not a bad thing to be nervous. It’s not every day a company as huge as Meta takes such a deep dive. Keeping a cautious eye open would be the smart thing to do in this situation. However, jumping ship is likely premature. If the writing is on the wall and nothing can stop Meta’s inevitable demise, then by all means take your money and run. But as it stands, Meta is far from going under. There is no doubt a rebrand and a redirection for Zuckerberg’s company is a bold and risky move. But if entrepreneurs don’t take risks, they don’t become the next Microsoft, Amazon, or Apple. Stay cautious, but take a little time to see where this goes before abandoning Meta altogether.

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You can value stock by what makes sense to you. Meaning this company’s assets, services, and products are above their competitors in your assessment of the company, and no one will be able to knock them from their number one spot. Through your knowledge of the company and their services, you could value it as a valuable company. If those facts are the opposite for a company, you could devalue that company. 

This theory is called your Common Sense, lol. But, you must be careful with the Common Sense Theory because the stock market sometimes rejects this theory, and the stock prices and values do not make sense. 

So, a more technical way to value stock prices comes into play. This is where I introduce you to Financial Ratios. Financial ratios are the numbers from a company (debt, earnings, growth, assets, etc.), and those numbers are compared, and a ratio for the comparison creates the Financial Ratio. Please don’t allow this to overwhelm you; it will make sense real soon.

To value stock, usually one or all of these four Financial Ratios are used, price-to-earnings (P/E) ratio, they are price-to-book (P/B) ratio, price-to-earnings-growth (PEG) ratio, and dividend yield. I will explain each one, and yes, I know this may sound difficult, and I want you to know “YOU are smart enough to learn this amazing information”. 

Don’t be scared; Get Knowledgeable. Let’s Go…

The most commonly used stock valuation Financial Ratio is the P/E ratio (yes, Investors sometimes only use one ratio to help them value a stock, it is not recommended).

What in the heavens is a P/E ratio? Hold tight I am getting to it…

In the next blogpost, you will learn what a P/E is. See you soon!

YEP, IT’S THAT SIMPLE.

NOW, LET THE OFFICIAL INVESTING PARTY BEGIN…

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 We are not certified financial advisors. But, we are INVESTORS. Now, let the FINANCIAL PARTY continue…

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