Opinion – Marcos de Vasconcellos: Facebook and Netflix may announce the market bubble burst

First it was Netflix. Now Meta (formerly Facebook). Two global tech giants melted on the stock market after showing the world their 2021 numbers.

The accounts are not terrible, when you think with the head of an “individual person”. Quite the opposite. Mark Zuckerberg’s company made a profit of US$ 39.37 billion in the year (R$ 208.5 billion, practically the GDP of Bolivia). The most popular video platform in the world has 221.84 million subscribers (more than the entire population of Brazil).

It turns out that the market behaves according to how much the numbers correspond to the expectations of analysts (of the market itself) or not. That’s why a stock can go down with the disclosure of excellent accounts or go up with the revelation of a billion dollar debt.

And then there’s that doubt: when the best students in the class get low grades, was it they who didn’t study or the school that charged more than it should?

The market’s expectation was that Netflix would maintain its growth rate. But the company predicted that it will “only” capture 2.5 million customers in the first quarter of 2022, after having obtained 8.3 million new accounts in the last three months of 2021. And it was “punished” with a drop of 25 % in its share price on Nasdaq.

In the case of Meta/Facebook, the year ended with practically the same number of users as it started (2.91 billion, more than ¼ of the world’s population), but the problem was the reduction of daily active users on the platform and a possible reduction in revenue this quarter.

It is estimated that the company will earn between US$ 27 billion and US$ 29 billion by March, which is about US$ 2 billion below market expectations. And there went the stocks, which lost 25% of their price in a single day.

The technology giants, called by the acronym Faang (Facebook, Amazon, Apple, Netflix and Google) are a good thermometer to understand if the market is with expectations above reality. As they are “spearheads” of the technology sector, brakes on their growth indicate where the market should go in the coming months.

And this recent fall in shares could be the beginning of a movement feared by the market and trumpeted by the English mega-investor Jeremy Grantham. He states that the American financial market is experiencing its third super bubble, which, in addition to the stock market, also affects the real estate and commodities market.

And he warns: the stock bubble starts to deflate first on the riskier side of the market. And technology companies, focused on rapid user growth, are just that.

As you may know, the stock market tries to anticipate the movements of the real economy. And by comparing both, we can see where the discrepancy in relation to expected growth may be. Excessive optimism today often results in a harsh correction tomorrow.

With the entry of the pandemic variable, vaccinations and variants into the calculations, however, making predictions about when corrections start becomes even more difficult. Netflix and Facebook investors say so.