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Meta stock down 67.5% year-to-date, Reality Labs expects multiple years of $10 billion losses

Yahoo Finance tech reporter Allie Garfinkle breaks down the declines Meta has seen in its own stock value, its competition with other platforms and app stores, and its forecasted losses expected from its Reality Labs branch.

Video transcript

JARED BLIKRE: It has been a rough year for Meta that might be an understatement. The Facebook parent company losing nearly 70% of its value this year alone. Yahoo Finance reporter Allie Garfinkle joins us now with more. Allie, what went wrong?

ALLIE GARFINKLE: You know, Jared, when we started talking about doing this segment, I was like, well, OK, where do we start? How long do we have? It's been an incredibly difficult year for them. And it comes down to external forces and internal forces, which sounds simplistic, but hear me out for a second.

External forces, right? Let's start with Apple. ATT, App Transparency Tracker, a privacy framework that Apple has implemented that's meant to allow consumers to actively opt in to the use of certain apps. Meta has come out saying that they think this is going to cost them $10 billion this year. So there's that part.

There's also the rise of TikTok, the rise of what Mark Zuckerberg has reportedly called unprecedented competition from that app. Now it doesn't sound major, but you have to understand, this is a huge, huge problem for Meta. They have [INAUDIBLE] remember, Meta, if Meta had a competitor, they acquired it. Instagram, WhatsApp-- you name it.

And it's important to also say that Meta has sort of been pivoting its platform, even compete with TikTok in terms of video. Of course, that pivot hasn't exactly necessarily been well-received. There was a controversy at some point this year where Kylie Jenner and Kim Kardashian sounded off saying they didn't like the pivot on Instagram. So, you know, those-- and that's just the external side of things, right?

DAVE BRIGGS: It is, indeed. They've been shifting their focus. Doesn't appear to be working out, though. What can you tell us?

ALLIE GARFINKLE: Yeah, there is a couple of things. Independently of how you feel about the Metaverse, Dave, which we've talked about on this show a lot, they're kind of conduct a pivot at a really difficult time. They made the decision to pivot to the Metaverse in a zero interest rate environment. That is a completely different situation than what we're into. Their Metaverse pivot sort of ran headlong into the wall of the macro, is kind of how I would phrase it. You know, higher inflation, higher interest rates. There's no more easy money, right?

So Meta has been trying to conduct this pivot with growth and innovation just being more expensive, right? So you saw on the screen there the Reality Labs loss. They've lost so far, Q1 through Q3, they've lost more than $9 billion on Reality Labs, which is their Metaverse operation, right? It also bears saying they're negotiating this as Sheryl Sandberg has left. She left in the fall. And she was most visible. She was, in many ways, the most visible face of Meta for the public for so long.

So there's kind of that piece of this as well. And I think the bottom line, when all is said and done, you know, what's the takeaway here? And I think we're still trying to figure that out, Dave. But what I would say is, I actually quote an analyst I spoke to this morning, Andrew Boone, JMP Securities. He said something that I thought was really smart. He was like, look, if the macro turns, there could be light at the end of the tunnel. But right now, Meta is still looking at a pretty big lift.

DAVE BRIGGS: Yeah, that's an awfully long tunnel. And it may be of the new Coke variety, but naming it the Metaverse, the name of your company, expecting everyone else to come in to your name may be shortsighted a little bit. Allie Garfinkle, nice to see you. Appreciate that.