Point is tech companies are highly sensitive to interest rates and now have to course correct in a world where the market is punishing excessive spending.
IMO, the market is overreacting. Both companies look pretty cheap to me.
Meta should make a free Android phone that allows tracking.
To quote from the latest Economist [1]:
> This logic has broader implications than most investors realise. Now imagine you will receive $100 a year, for ever. By the reasoning above, this has a finite present value, since compound interest means payments in the distant future are almost worthless. With interest rates at 1%, the payment stream is worth $10,000; at 5%, it is worth $2,000. But as well as reducing the value, the higher rate also changes the distribution of that value. With rates at 1%, less than a tenth of the stream’s value comes from payments made in the first ten years. At 5%, around two-fifths does.
and
> In other words, higher interest rates dramatically alter firms’ incentives when choosing which timeline to invest over. Sacrificing short-term profits for longer-term gains is one thing when you are trying to persuade investors that your superapp, machine-learning algorithm or gene-sequencing widget has the potential to up-end an industry. It is another when even the best-case scenario has its value so heavily skewed towards what can be done in the next decade. Startup founders are used to shaking off derision over implausible, Utopian dreams. It is more of a kick in the teeth to realise that even Utopia is not worth much unless it can be achieved in short order.
Sorry for the long quotes, it was the best I could do, I highly recommend that article in its entirety.
However, I think the economist column/article misses some important points:
1: There is a stereotype that corporations only look at the next quarter’s earnings. The article argues the opposite, that corporations are long term focused. The article needs to address that point.
2: Stocks and dividends should be inflation proof (with some assumptions, such as revenues increase with inflation).
3. The article doesn’t seem to mention bonds, even though it talks about constant $ returns. What?
The most interesting part of the article for me was “The original marshmallow test, it turned out, had a flaw. Exclude some children from better-off families (which seems to make them both more willing to delay gratification and more likely to succeed in later life) and much of its predictive power suddenly disappears.” [Slight edits]
Facebook Phone (rebranded HTC) was released in 2013 https://en.wikipedia.org/wiki/HTC_First but had poor sales.
The metaverse is their next play to build a world where they are a bit more shielded from Apple/Google/Microsoft's hardware influence. Pivoting a large business is really hard.
Meta pivoting to burn money on a VR universe that nobody actually seems to want. Meta burning FB users by constantly altering their FB news feed, making it less and less a place for friends, and more a place to see endless reposted memes and ads for drop-ship products and stolen IP tshirts. Meta burning Instagram users by trying to force everyone's favorite photo-sharing app to be a shittier version of TikTok, as well as the above constant feed refactors...
TikTok is definitely a concern but turning off the money pump is a much, much bigger one.
Reducing staff by ~10% or whatever after doubling it in the last couple years isn't exactly a strong signal of anything.