Should You Sell Meta Stock After Facebook Stopped Hiring?

Key Points

This year, Meta will hire fewer people—6,000–7,000 instead of 10,000.
In addition, Zuckerberg hopes that weaker employees will resign in the face of macro headwinds.
This is just the most recent problem to plague the tech giant.

Meta Platforms are experiencing a worsening of the situation (META-0.76 percent).

With revenue increasing by just 7% in the first quarter, the parent company of Facebook is coming off its slowest growth ever, and the firm predicted that growth will be even slower in the second quarter.

Apple's crackdown on ad targeting, the emergence of TikTok, increasing privacy rules in Europe, headwinds in digital advertising, and a dubious redesign to promote its metaverse business, Reality Labs, which is currently a huge money pit, are just a few of the difficulties Meta is experiencing.

Now, Facebook's issues are becoming more personal.

During a weekly Q&A session, CEO Mark Zuckerberg reportedly warned staff members that the current economic climate "could be one of the worst downturns that we've seen in recent history."

A reduction in employment plans is one of the adjustments the corporation is making in response to the slowdown. Meta has reduced its former objective of 10,000 engineers to roughly 6,000 to 7,000 for this year.

Additionally, Zuckerberg committed to boosting performance standards for current workers in order to cull out underperforming workers. He said to his staff, "I think some of you might decide that this place isn't for you, and that self-selection is OK with me. That's part of my hope by raising standards, having more aggressive goals, and just kind of turning up the heat a little bit."

Chris Cox, chief product officer, emphasized the urgency by stating that the organization must "prioritize more ruthlessly" and "deliver perfectly in a climate of slower growth."

What it implies for investors in Meta

The Facebook parent company has dealt with controversies in the past, including the Cambridge Analytica scandal and widespread criticism of the harmful effects of social media. It has also overcome commercial challenges, including the shift to mobile.

The present, though, feels different in several ways. Perhaps never before has Meta had to defend itself on so many fronts at once, and the company's halting expansion makes it appear more vulnerable than ever. The company appears to have gone off course as a result of a confusing branding, privacy concerns from both Apple and the EU, TikTok's ascent to social media popularity, and problems on a larger scale.

Facebook has always responded to opponents' concerns about the firm's future with massive growth and mountains of money, but with revenue growth falling to single digits and the corporation issuing new growth-related warnings, the company now appears less dependable than it once did.

Regarding Facebook's internal culture, issues are raised by Zuckerberg's rallying cry. High performance standards are common among the biggest digital businesses in the world, but Facebook's reputation as a great place to work has recently suffered as well. The business used to be ranked first on Glassdoor's ranking of the finest workplaces, but it has subsequently dropped all the way to number 47.

It is unlikely that the news of slower hiring and stiffer employment requirements will help it draw in the best developers.

Should I sell my Meta stock now?

The good news for investors in this situation appears to be that these worries are already reflected in the stock's price. When compared to peers like Alphabet, Amazon, and Apple, Meta shares have dropped by more than 60% from their peak since last September.

The company's pivot to the metaverse, which is costing it more than $10 billion annually, has raised investor skepticism, and it's uncertain whether or not revenue growth from the metaverse will return to pre-pivot levels.

However, Facebook's fundamental qualities are still robust. One of the strongest ad businesses in the world, the corporation has about 3 billion users across all of its platforms. Selling the stock now with so much bad news built in seems to be the incorrect course of action, especially given those strengths and the company's forward price-to-earnings ratio of just 13.

However, anyone looking for a speedy turnaround should take Zuckerberg's most recent caution seriously.