Beset by competitive and macroeconomic threats, Meta Platforms Inc. sinks down in the ranking of the largest American companies.
After a 9.4% daily drop in its shares, Meta
was ranked 10th by market value as of Tuesday’s close, falling below Visa Inc.
for the first time since early August. Meta, the parent company of Facebook and Instagram, ranked fifth among U.S. companies in December according to Dow Jones market data, joining the other big four tech companies — Apple Inc.
Google’s parent company Alphabet Inc.
and Amazon.com Inc.
Meta’s stock has been penalized this year, however, on concerns about competitive dynamics and the impact of economic uncertainty on ad revenue. That $1 trillion market cap has been cut by more than half, allowing several companies to jump ahead of the Meta — which announced its new corporate name last October — on the rating chart.
Visa was valued at $413 billion at Tuesday’s close, compared with $412 billion for Meta. Exxon Mobil Corp.
is next on the list with a market capitalization of $397 billion according to Dow Jones market data. Still above Visa are the other big four tech companies in Apple, Microsoft, Alphabet and Amazon, as well as Tesla Inc.
Berkshire Hathaway Inc.
UnitedHealth Group Inc.
and Johnson & Johnson
The shares of Meta suffered its sharpest daily decline since February in trading on Tuesday amid broad market pressure from the latest reading of the consumer price index, which resurfaced concerns about the potential effects of inflation on the advertising landscape.
“Meta, like other social media companies, has been negatively impacted by the moves Apple has made in the ad business, as well as the general expectation of lower ad spend as we may enter a recession,” said Nick Meising, director of research at Sentieo, which tracks changes in market values in recent weeks.
“Additional factors include competition from TikTok and investor skepticism about the company’s metaverse efforts,” Meising said.
Meta executives warned about the impact that inflationary pressures and other economic problems could have on the business, with Sheryl Sandberg, then the company’s chief operating officer, telling investors on Meta’s most recent earnings call that “recessions put pressure on traders to making sure their ad budgets are being spent in the smartest way possible,” though she thought Meta tools could help them maximize their investment.
CEO Mark Zuckerberg said on the call in July that “it appears we have entered an economic downturn that will have a broad impact on the digital advertising business.”
Visa shares held up better against inflation, falling just 8% for the year, while Meta shares lost 54%.
While Meta executives struck a cautious tone about the current landscape, Visa’s management team came out more optimistic due to the nature of the payments giant’s business. Back in April, Visa Chief Financial Officer Vasanth Prabhu said inflation had “net-net” positive for Visaand as recently as Monday he said this consumer spending remained resilient.
Visa “is somewhat insulated from the big macro story, persistent inflation, because they get paid for nominal volumes,” Meising told MarketWatch, noting that the company has also benefited from a big recovery in international travel and the spending that comes with it.
Meta briefly flirted with a position outside the top 10 of the most valuable US companies in the US in early August, but falling below Visa this time kept it in the top 10 as fellow technology company Nvidia Corp.
has also seen its value plummet in recent weeks.
Nvidia ranked seventh by market capitalization earlier this year, but is now 15th with a valuation of $327 billion, according to Dow Jones market data, among inventory issues that have reached total revenue and U.S. crackdown on sales of high-performance artificial intelligence technology to China.