These two S&P 500 stocks have had their worst weeks
PayPal Holdings Inc. and Meta Platforms Inc. are both going through business transitions, causing many investors to run for the hills.
PayPal PYPL Shares,
and Meta FB parent of Facebook,
each just posted their biggest weekly declines ever after former tech darlings delivered disappointing forecasts. Those weekly declines followed record single-day percentage drops for both stocks after earnings.
PayPal’s stock plunged 22.9% to top its previous record weekly decline of 21.3% set in the week ending March 20, 2020, according to Dow Jones Market Data. Meta’s stock lost 21.4% on the week, beating its previous record weekly decline of 17.6% suffered during the week ended July 27, 2012.
Equities were the only two major drivers of the S&P 500 SPX,
to record their worst weekly percentage decline last week, according to Dow Jones Market Data. Clorox Co. CLX,
stocks fell 15%, their worst week since 2000.
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Meta’s earnings reaction “shows you that many investors have ZERO PATIENCE for reversal stories with near-term uncertainty in this band,” wrote Jordan Klein, a desk-based Mizuho analyst associated with the team at sale of the company and not to its research unit.
Although he thinks the business will do well in the long term, he fears 2022 will be a “dead year”.
Meta executives outlined a number of trading risks during the company’s earnings call on Wednesday afternoon. The company is under pressure from the AAPL of Apple Inc.,
privacy changes, which make it easier for users to opt out of having their online activity tracked by third parties. Meta management estimates that these changes could negatively impact revenue by $10 billion this calendar year.
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Additionally, the company sees TikTok as a growing threat. Meta is trying to take a page out of TikTok’s book and offer more short-form video content through its Reels platform, but the company isn’t generating as much revenue when users watch Reels content as when they view posts in their streams or through the stories.
“As more and more business moves to this medium, we’re replacing some time in News Feeds and other high-monetization services,” chief executive Mark Zuckerberg said on the call to audiences. Meta results.
Bernstein analyst Mark Shmulik noted that when companies have good news they tend to spread it, but when they have bad news “it’s better to lay it all out at once and move on.” “.
And the BMO Capital Markets analyst commented that by establishing TikTok as a major rival, Meta management “put a lot on the public record tonight that pushes back the antitrust narrative.” Of course, this kind of talk may also have served to make the investment community more nervous.
PayPal is also in the midst of a recently announced business transition that led to some surprising insights Tuesday night. The company revealed that it will take a new approach to user growth in the future, focusing on “higher value” accounts rather than the less engaged accounts it needs to incentivize to transact.
Read: PayPal stock plunges on worst day on record after ‘awful’ earnings report
Executives argued the change would bring financial benefits, as PayPal wouldn’t have to spend money offering incentives to lapsed users that don’t help boost revenue, and at least one analyst understood the logic. of this new strategy.
Another saw various bright spots in the latest report, including improved engagement trends, which he said boded well given that the company will now focus on getting better users. engaged to try its services even more often.
Still, others have expressed shock that PayPal is giving up on its mid-term outlook of 750 million active accounts by 2025, a goal the company proposed a year ago and stuck to its earlier results a while ago. three months. And PayPal’s mention that inflation and supply constraints were putting pressure on spending seemed, to some, at odds with more optimistic views of the spending landscape provided by Mastercard Inc. MA,
and Visa Inc. V,
See more: PayPal stock still offers ‘four silver linings’ after ‘epic’ selloff, analyst says
Big stock moves from Meta and PayPal created jitters on Wall Street, especially once Meta competitors Snap Inc. SNAP,
and PIN Pinterest Inc.,
reported their own results. Snap followed a 24% drop in shares in Thursday’s session, which followed Meta results, with a 58.8% rise on Friday, after the company suggested it was holding up better in the changing landscape. .
This kind of rocky business dates back to the dot-com era, Mizuho’s Klein wrote.