Menlo Park, California – Meta Platforms, Inc. experienced a significant setback on Thursday as the social media giant saw its stock plunge by 10.6%, marking its worst day since October 27, 2022. This sharp decline in value came shortly after Meta released its first-quarter financial results to the public. The company’s market valuation took a hit of $200 billion immediately following the earnings announcement, largely due to concerns over increased costs related to its investments in artificial intelligence (AI).

Despite the strong underlying sales and profit performance reported by Meta Platforms, investors remain cautious. Analysts predict potential downward revisions to profit estimates in light of the company’s guidance on higher expenses. From a technical standpoint, some experts advise against entering the market at this time, suggesting that it may be premature to make investment moves until key levels on the charts demonstrate stability.

The first quarter of 2024 proved to be a robust period for Meta Platforms as its advertising business, particularly on Facebook and Instagram, delivered notable results. The company exceeded expectations with adjusted quarterly profits of $4.71 per share, outperforming analysts’ forecasts. This marked the fifth consecutive quarter of profit beats for Meta Platforms, indicating strength in its marketing sector.

Looking ahead to the second quarter of 2024, Meta Platforms anticipates sales between $36.5-39 billion. However, the company’s cautious outlook and emphasis on scaling its infrastructure investments, specifically in AI, led to a decline in its stock price. The CEO’s indication of a multi-year investment cycle for AI initiatives raised concerns among investors about the timeline for realizing positive returns.

One of the key challenges facing Meta Platforms is its heavy reliance on advertising revenue, with limited diversification into other revenue streams. The company’s Reality Labs division continues to operate at a loss, highlighting the importance of AI investments for future growth. If these investments do not yield anticipated returns within a reasonable timeframe, investor confidence in Meta Platforms may waver.

In conclusion, analysts advise a cautious approach towards investing in Meta Platforms following its first-quarter performance. The company’s stock valuation, although currently trading at 19 times earnings, faces uncertainties related to future profit estimates and market sentiment. Observers recommend observing the market for signs of a bottom formation before considering any investment decisions related to Meta Platforms.