Shares of Facebook’s parent company Meta Platforms (META) are being cooked up as the tech company spends money manufacturing virtual reality devices, generating awareness, and finding friends for a future in the metaverse.
Its clients’ advertising budgets are tightening as companies restructure costs amid macroeconomic challenges — which leads even an optimistic analyst to say the third quarter for Meta Platforms is “make or break.”
“I think the stock is back to questions about really fundamental fundamentals,” Mark Schmlick, chief analyst at AB Bernstein told Yahoo Finance. “People can understand that this [the metaverse] As a long term initiative. I imagine investors would love it if they were spending a lot less on it.”
Advertisers tend to run digital marketing campaigns where there is the largest audience, targeting capabilities, and conversion rates – for a decade, Meta affiliates Facebook and Instagram have been that place. Corporate budgets during macroeconomic uncertainty make it crucial to experience the value of advertising spend through sales.
“The macro environment continues to deteriorate. We believe many companies that rely on advertising will lose profits in the fourth quarter,” Needham’s chief analyst, Laura Martin, told Yahoo Finance. Re-losing a lot of user time on TikTok. And it continues to happen. “
According to research by Piper Sandler, TikTok is the preferred social media app among teens and the margin has only widened for the Bytedance-owned company compared to Facebook and Instagram.
“I think Mark Zuckerberg is telling us he doesn’t think he has a core business,” Martin said. “He’s moving to Reels because it’s competing with TikTok. He’s moving into the metaverse, and he’s changed the name of this company, which tells me he doesn’t think his core business he built 15 years ago is actually a business anymore.”
Find the legs in the metaverse
Facebook spent $10 billion in 2021 in early efforts to build the metaverse and Mark Zuckerberg told shareholders in 2022 that the company would continue to spend heavily to build the metaverse and would drain money for three to five years.
The big bet could be that the Meta will be able to sell beta hardware to the metaverse and why it’s there.
“If you take a look at the drivers behind this, we’ve gone through these changes in the past from desktop to mobile,” Shmulik said. [Meta] Understand that at some point, there will be another change in the computing platform. They don’t want to be stuck in the application layer. “
At Meta Connect, Facebook founder and CEO Mark Zuckerberg introduced a $1,500 VR headset, with the prevailing plan that a suite of familiar workplace collaboration apps might spur participation in the metaverse.
Accenture, Zoom, and Microsoft have also announced a metaverse partnership with Meta platforms. Microsoft delivers an important friend in virtual reality with a commitment to bring productivity tools and cloud gaming technology to the experience.
“I think what he’s talking about in terms of changing the world of consumer computing is really innovative, interesting and risky, but bringing the CEO yesterday to both Microsoft and Accenture? Great – he says he has some great partners in the enterprise,” Martin said. . “And I don’t think consumers want to pay $1,500. I think that’s the exception. But I think Accenture can pay to buy thousands of goggles out of $1,500.”
Brad Smith is an anchor at Yahoo Finance. Follow him on Twitter Tweet embed.
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