The Dow Jones Industrial Average rose 223.03 points, or 0.70%, at the open to 32,062.14, but Meta’s slump pulled the Nasdaq down 0.2%.
The S&P 500 fell after starting the session in green.
Markets got some encouraging economic news as the government reported the US economy returned to growth last quarter, expanding 2.6%.
The dollar trimmed gains after data showed that US gross domestic product advanced for the first time this year. Treasury 10-year yields wavered, after briefly dipping below 4%.
McDonald's rose 3% in premarket after it reported strong third-quarter sales, boosted by customer engagement on its app. Southwest Airlines jumped more than 4% it reported record operating revenue in its third quarter, thanks to strong summer travel demand.
Meta Platforms shareholders are paying dearly
Meta's shareholders are paying dearly for its spending on the metaverse: The Facebook parent’s market value has collapsed by a whopping $677 billion this year, forcing it out from the ranks of the world’s 20 largest companies.
The punishment shows no signs of easing anytime soon. Meta’s stock is down as much as 25% after it spooked investors with ballooning costs to fund its version of virtual reality and a decline in revenue.
Meta was the sixth biggest US company by market capitalization at the start of the year, flirting with a $1 trillion market value. Fast forward 10 months and the stock will be worth about $258 billion, ranking it 26th. Its market value is now smaller than companies including Chevron Corp., Eli Lilly & Co. and Procter & Gamble Co.
Once a Wall Street darling, Meta is gradually losing favor with brokerages. At least three investment banks -- Morgan Stanley, Cowen and KeyBanc Capital Markets -- cut their rating on the stock after the company gave a disappointing quarterly revenue outlook.
“Meta remains too aggressive with its investments in long-term initiatives despite a sharp deceleration in expected revenue growth," said Mandeep Singh, an analyst at Bloomberg Intelligence. “The company’s opex and capex view for 2023 is surprising, given the lack of traction so far with its metaverse efforts."
While Thursday’s premarket slump is a big move, it pales in comparison to its record-setting rout in February when it plunged 26% on the back of woeful earnings results, and erased about $251 billion in market value. That’s the biggest wipeout in market value for any US company ever.
The decline in the stock this year has attracted value investors, who buy beaten-down stocks in anticipation of a turnaround. But there’s no sign of those bets paying off any time soon.
Meta announced its shift to investing in virtual reality a year ago, along with a name change of the company from Facebook Inc. to Meta Platforms. The company said Wednesday it expects total expenses for this year to be $85 billion to $87 billion.
For 2023, that number will grow to an expected $96 billion to $101 billion. That’s the big negative, since investors were hoping Meta would aggressively cut costs, said Neil Campling, an analyst at Mirabaud Securities.
The company’s quarterly capital expenditure was more than all but 16 of the S&P 500 companies spent all of last year, as per Bloomberg data.
