Jim Cramer suggested earlier this year that shares in Facebook parent Meta would go up. Today, he said hes sorry.
Very sorry.
In early June, the colorful host of CNBCs Mad Money told investors that Meta shares had nowhere else to go but up.
Today, he apologized for his bad call following Metas quarterly earnings announcement Wednesday evening, which entailed a disappointing quarterly revenue outlook. On Thursday, Meta shares fell 25%, their biggest one-day drop since February. Investors have pushed the stock down more than 70% this year.
I made a mistake here. I was wrong. I trusted this management team. That was ill-advised, Cramer said in a somber tone on CNBC. The hubris here is extraordinary, and I apologize.
Morgan Stanley downgraded Metas shares for the first time on Thursday, as did Cowen and KeyBanc Capital Markets. Morgan Stanley analysts said they expect the companys free cash flow to slump by 60% in 2023 and slashed their price target by nearly half.
As the owner of Facebook and Instagram, Meta remains a juggernaut in social media. But under the direction of CEO Mark Zuckerberg, the company is investing enormous amounts of time, energy, and money into the metaverse, a virtual reality universe that its warned could take years to pay off, assuming it ever does.
Theres still a long road ahead to build the next computing platform, but we are clearly doing leading work here, Zuckerberg said on the earnings call. This is a massive undertaking, and its often going to take a few versions of each product before they become mainstream.
Palmer Luckey, founder of VR headset maker Oculus, which then-Facebook acquired in 2014, is among many industry observers unimpressed with the companys main metaverse offering, Horizon Worlds. I dont think its a good productIts not good, its not fun, he said this week at the Wall Street Journals Tech Live conference, likening it to a project car hobby one ultimately loses money on after significant investments. (Luckey was ousted from Facebook a few years after it acquired his startup.)
Even Meta employees working directly on the project seem to think little of it, with one noting in internal documents, An empty world is a sad world. With not nearly enough users sticking around, the company earlier this year announced a quality lockdownno launches of new featuresto address bugs and complaints.
Yet Meta invested $10 billion into the metaverse last year and plans to sink a similar amount into it this year. With the companys other properties also challengedFacebook and Instagram face strong advertising headwinds and tough competition from TikTokits little wonder many investors are losing faith.
Some observers joked Cramers apology today could be a good sign for Meta shares, as hes gained such a reputation for getting things wrong that inverse Cramer became a meme on Twitter. The idea is that an investor can succeed by listening carefully to what he says and then betting on the exact opposite outcome.
They certainly would have done well by doing the opposite of what he said in early February. Cramer was asked on CNBC about Metas poor earnings report at that time and if shares dropping in premarket trading was an amazing buying opportunity or some kind of terrible inflection point. Cramer answered, Im going for the formerI have total faith in Mark Zuckerberg.
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