Shares of Facebook parent Meta plunged Thursday after the company forecasted weaker-than-expected revenue growth in the next quarter.
This resulted in a 24% plunge in U.S. after training hours on the back of poor earnings results, putting it on track to erase more than $200 billion, the biggest in market history. The company, which released earnings under its new name for the first time with a new reporting structure, missed its estimated earnings for the fourth quarter at $3.67 vs the $3.84 Meta analysts were expecting. The incorrect estimates drove concern in the eyes of the share holders and speculations have started to rise on whether Meta can really back up its future claims…
Thursday’s $210 billion drop is set to shave its market cap to about $689 billion JP Morgan analyst stated. The analysts said Meta “is seeing a significant slowdown in advertising growth while embarking on an expensive, uncertain, multi-year transition to the Metaverse.”
This only creates more skepticism for virtual real estate and its potential to become an established sector within the Metaverse.
Investors are having a hard time truly understanding how virtual real estate will work. There’s a problem with equating digital real estate to the physical: the primary sources of value that apply to real-world properties don’t apply in the metaverse, meaning your virtual land plot may not simply rise in value. Experts say these purchases are more of a crypto asset than anything, one that is speculative and “risky” to buy. But there are two main things that are supposedly giving metaverse real estate its value: scarcity and location, two fundamentals of physical real estate.
Experts said they don’t exactly apply to the metaverse, since you can’t artificially introduce scarcity. It seems the infrastructure in which real estate is valued will simply not apply the same way in the virtual world. Fixed-supply scarcity is the main source of value for much of the crypto world already, like for bitcoin, which has a limited capacity of 21 million coins. This on top of current drop in Meta stock only creates more concern for the potential sustainability. But let’s not undermine its potential, Metaverse real estate sales reached $501 million in 2021 and could reach nearly $1 billion this year and is clearly a huge force in the current market.
Which begs the question is this all just one big phase that’s on its way to fizzling out? Or is this just a small bump in the road to future full of success?