Focus on meta-sharing: the “metaverse” after the image crisis

WHAT’S NEW AT META:

Facebook is now called Meta. The name change comes after a flurry of negative headlines around Facebook, Instagram and WhatsApp. Among other things, the group had previously come under massive pressure due to internal documents made public by a former employee. Whistleblower Frances Haugen accuses the company of putting profits ahead of users’ well-being.

“Facebook intentionally withheld important data from the public” – in order to prevent the online network’s understanding mechanisms, Haugen criticized in an interview with the German Press Agency. “Because today the only people who can search Facebook work at Facebook, we never had the chance to build such an infrastructure.” She calls on politicians to better understand how online networks work. To do this, companies should be obliged to provide information on a regular basis – “roughly weekly, daily”.

Additionally, regular fines for violations around the world have kept the group busy. In France, for example, around 60 million euros for the decision whether or not to accept cookies. The data protection authority explained that it was much more complicated for them to reject the small sets of data than to accept them in favor of the group. In Russia, Meta had to pay the equivalent of around 24 million euros because the network repeatedly failed to remove “banned content”.

But Facebook isn’t all the band has in its wallet. In order to come out of the shadow of the social network, the company now wants to be called Meta. With this in mind, Meta is now working on a “Metaverse”, a virtual environment in which the physical and digital worlds should come together. On the one hand, Zuckerberg relies on virtual reality (VR), which allows users to immerse themselves in digital worlds with special glasses on their heads. Virtual reality company Oculus, part of Reality Labs, also belongs to the Facebook group.

The Facebook founder also sees so-called augmented reality (AR) as a “metaverse” component, in which digital content is displayed on screens or using projection glasses for the viewer in the real environment. Reality Labs is likely to be the part of the company where the “Metaverse” will be primarily developed in the coming years. In the current quarterly report, it was said that investments in Reality Labs would reduce Facebook’s operating profit by about ten billion dollars.

At present, the advertising activity was running at full speed despite the image problems. In the third quarter, ad revenue rose about a third year-on-year to $28 billion, even though Meta itself had raised concerns about the business in previous months. Above all, Apple’s latest privacy rules on the iPhone and other iOS devices have turned management upside down.

The new rules state that since the summer, all app developers must explicitly ask users for permission if they want to track their activities on different apps and services for advertising purposes. According to polls, most users reject this. As a result, many previous business models in the advertising industry become confused. Meta wants to comment on how the year as a whole went on February 2.

WHAT SHARING DOES:

At least from a stock price perspective, the group’s renaming to Meta hasn’t helped so far. The price was recently barely above the level the stock had before. The log is currently about 15% less than in September, when the Facebook log hit an all-time high of over $380. At that time, the group was worth more than a trillion dollars on the stock market – the market capitalization is currently below this mark again.

Investors who have held the group’s shares in their portfolio for a year can expect a gain of just over one-fifth. Over the past two years, the increase has totaled almost 60%. The newspaper has lagged behind the development of the NASDAQ 100 since the outbreak of the corona pandemic. Over the past five years, Meta stock has also underperformed the US tech pick index with an increase of around 160%.

The track record is different since the IPO nearly a decade ago in May 2012. From the issue price of $38, it has risen by just over 760%. By comparison, the Nasdaq 100 has gained just over 500% during this period.

Founded in 2004, the group is currently worth just over $910 billion on the stock market, making it the smallest of the top five US tech companies by market capitalization. Amazon weighs almost double ($1.64 trillion). Number three is Google (Alphabet C (ex Google)) parent Alphabet (Alphabet A (ex Google)) with approximately $1.8 trillion.

Microsoft (Microsoft) creates a market capitalization of nearly $2.4 trillion and is currently the second most valuable company in the world. Apple is by far in the lead. The band known for the iPhone was sometimes worth just over $3 trillion at the start of the year – it’s currently around $2.8 trillion.

The rapid rise in the share price has made the company’s controversial founder and CEO, Marc Zuckerberg, one of the richest people on the planet. The Bloomberg news agency recently valued his fortune at just under $123 billion. He does not own any of the so-called A shares traded on the stock exchange. He owns the majority of Facebook’s so-called B shares, which are not listed on the stock exchange but carry ten voting rights. He holds more than half of the voting rights and can thus control Facebook, although he owns just over ten percent of the capital.

WHAT ANALYSTS SAY:

Of the 62 analysts included in the Bloomberg database, 52 recommend buying the stock – only two recommend selling the stock. The average target price is around $400, which is about a fifth above the current price – the range extends from $250 to $460.

JPMorgan analyst Douglas Anmuth has high hopes for the announced Metaverse. Although it does not exist yet, there are already some developers like game producers who are developing offers. Anmuth also believes that products for virtual fitness, work and education are possible.

In the initial phase, Meta should initially charge low fees for its world to attract as many developers as possible, the analyst pointed out. He expects Meta shares to be worth $390 over the next 12 months.

Oculus’ surprising rise to the top-downloaded app in the US shows VR apps are more prevalent than previously thought, Jefferies expert Brent Thill points out. Meta’s potential investments in this area are likely to dilute earnings per share, but make sense in the long run to attract users to VR games.

And the Swiss bank Credit Suisse does not see Meta at the end of its creativity. Due to long-term opportunities, the group’s shares remain promising, analyst Stephen Ju said. However, he lowered the target price from $500 to $430.

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