Meta shares plunge 24% to the lowest price since 2016

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  • Facebook’s parent company reported a decline for the second quarter in a row.
  • Meta’s Reality Labs division, which houses its VR headsets, lost more than $9 billion in the first three quarters.
  • Morgan Stanley, Cowen and KeyBank downgraded Meta on Thursday, citing increased spending.

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shares of meta fell 24.5% on Thursday as investors and analysts digested the company’s lackluster third-quarter earnings and a weak fourth-quarter outlook. The stock closed at $97.94, its lowest price since 2016.

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Facebook’s parent company reported quarterly revenue of $27.7 billion on Wednesday, a decline of more than 4% year over year and its second quarter decline. Its profit fell 52% to $4.4 billion.

Meta warned that the fourth quarter would be similar, issuing a weaker-than-expected outlook. It is expecting revenue for the fourth quarter to be $30 billion to $32.5 billion. Analysts were expecting sales of $32.2 billion.

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Meta CEO Mark Zuckerberg reiterated his commitment to spending billions of dollars developing the Metaverse. Meta’s Reality Labs unit, which is responsible for developing the virtual reality and related augmented reality technology that underpins its plans for the Metaverse, has lost $9.4 billion so far this year.

Morgan Stanley downgraded the stock on Thursday, citing higher spending. Analyst Brian Novak cut his price target from $205 to $105. He expects the company’s issues to persist as Meta continues to increase spending to build out its AI capabilities.

Cowen’s John Blackledge also downgraded Meta from outperforming to market performance, and lowered its price target from $205 to $135, citing the higher trajectory of operating and capital expenditures. KeyBank’s Justin Patterson lowered his rating on the stock from overweight to sector weight, citing rising costs.

Since the start of the year, Meta shares are down more than 61%. It’s been hurt by competition from rivals like TikTok, as well as a broader slowdown in online ad spend and challenges from Apple’s iOS privacy updates.

— CNBC’s Michael Bloom

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