Meta Platforms’ weak forecast sparks meltdown of social media stocks

(Reuters) – Facebook owner Meta Platforms Inc’s quarterly earnings miss and poor forecast on Wednesday ignited a meltdown in social media stocks and threatened to smother a recent recovery from a Wall Street tech selloff.

Meta tumbled 21% following its quarterly report after the bell, erasing about $200 billion worth of its stock market value. A decline of this size in Thursday’s session would mark the company’s worst one-day loss since its Wall Street debut in 2012.

The owner of Facebook and Instagram said it was expecting current-quarter revenue between $27 billion and $29 billion, missing the consensus analyst estimate of about $30 billion.

Twitter Inc and Pinterest Inc each tumbled about 10%, zapping over $4 billion in market capitalization. Snap Inc slumped 18%, losing $9 billion in stock market value.

“This is a very unforgiving environment and this is likely an over-reaction for companies with strong balance sheets. But we are seeing clearly that investors are skittish and they will hit the sell button first and ask questions later,” said Michael Farr, chief executive of Farr, Miller & Washington LLC.

The rout reached beyond social media, with Amazon.com Inc down 3% in extended trade ahead of its quarterly report on Thursday. Alphabet Inc dropped 1.9%, surrendering part of a 7.5% rally it enjoyed earlier in the day following its blowout quarterly report on Tuesday.

Short interest in Meta ahead of Wednesday’s report was almost $8 billion, equivalent to 1% of the company’s float, suggesting short sellers, according to data from S3 Partners.

Nasdaq futures dropped 1.8%, signaling investors expect a decline when Nasdaq trading begins on Thursday.

“It’s a sign of decelerating growth, and people don’t like to see that with growth stocks,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

The Nasdaq in recent sessions has bounced back from its worst January since 2009. Concerned about rising interest rates, investors had been selling technology and other growth stocks for months.

The Nasdaq remains down about 10% from its record high close in November. At its latest price of about $253 late on Wednesday, Meta was down about 34% from its September record high close.