Perennial CNBC financial hack Jim Cramer took to the air Thursday issuing an emotional mea culpa, one that bordered on tears, as he lamented a massive miss on Meta stock. Meta is the parent company of Facebook.
After having been bullish on Meta in June, saying the stock had “nowhere to go but up,” the stock plunged nearly 25% of its value upon the release of horrific third quarter data upon news that profits had been halved. This in turn led to a weak forecast for the fourth quarter.
The outburst began after Cramer, appearing alongside his co-hosts David Faber and Carl Quintanilla, played a clip of Meta CEO Mark Zuckerberg explaining the dip in profitability and the challenges currently being undergone in the social media space.
“There are a lot of things going on right now in the business and in the world and so it’s hard to have a simple, we’re going to do one thing and it’s going to solve the issues,” Zuckerberg said. “There’s a lot of competition, there are challenges especially coming from Apple and then there’s some of the longer term things that we’re taking on expenses because we believe they’re going to provide greater returns over time.”
“Cash flow last year, $9.5 billion, now less than $1 billion,” Cramer infused, before segueing into his emotional apology.
— unusual_whales (@unusual_whales) October 27, 2022
“Let me say this, fellas. I made a mistake here. I was wrong, Cramer began. “I trusted this management team. That was ill-advised. The hubris here is extraordinary. I apologize.”
“I had a belief that there was a recognition that there is an amount that you can’t spend. Contrast that with Jim Farley, who took a project that was his, and closed it, because it was not ready. It was not near enough. This situation is almost a rogue situation,” he continued.
“I thought there would be an understanding that you just can’t spend, and spend through free cash flow, that there had to be some level of discipline, and I didn’t get it but, David, what did I get wrong? I trusted them, not myself, for that I regret. I’ve been in this business for 40 years, and I did a bad job. I’m not proud. I’m not proud,” Cramer then added.
If we take a step back, Cramer admits his mistake was because Facebook was spending funny money like there was no tomorrow (including on pet projects like Zuck’s frightening Metaverse) and he thought this undisciplined approach wouldn’t somehow bite them in the digital derrieres. I’m sorry, what?
It cannot be overstated how damaging Zuckerberg’s “hobby project” Metaverse is unraveling the overall thread within the company. As Fortune writes, there is little fanfare even within Meta itself, and industry outsiders have gone so far as to simply say it’s “not good” and “not fun.” Here is Fortune continuing with its assessment of the thus-far failed venture:
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 lockdown”—no launches of new features—to 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 company’s other properties also challenged—Facebook and Instagram face strong advertising headwinds and tough competition from TikTok—it’s little wonder many investors are losing faith.
If people were wise, they would have been following the internet’s “inverse Cramer” investing strategy. Listen to the CNBC bullhorn and then bet the opposite. Shorting Meta shares would have been quite lucrative in this case.
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