Meta could drop 80% in the stock market. Should we panic?

It seems like forever since the stock market sent investors into a panic two weeks ago. At Piggyvarkens, we were inundated with journalists suddenly wanting to know how we as investors should handle this and whether investors should adjust their strategies now that tech stocks are falling sharply. What did we say next at De Morgen? “The events of the last two or three weeks are not really special.” Where does this decline stop? No idea, but you can’t rule out an 80% decline for Meta (Facebook’s parent company), for example, as we noted at the time.

Technology stocks are volatile.

Is Meta down 80%? “Stefan, you need to lend me some of those psychedelics that make you imagine this scenario.” I’m not saying Meta will lose 80%, but I am saying it’s definitely possible. What amazes us at Spaarvarkens is that new investors sometimes find it hard to believe that high-performing companies like Meta can fall so sharply. What should we tell them then? That they simply need to go back in time by two years, because in 2022 Meta’s share price has already fallen by 80%, something that investors today seem to have completely forgotten. In 2021, the group reached a record high of nearly $380 per share. Just over a year later, the company was down to $90. A loss of nearly 80%. You see the same story at Amazon. Over the same period, the stock lost more than 50% in just over a year, with Nvidia losing 66%. And that wasn’t that long ago; we’re barely talking about 2022.

Is this why you should be worried about tech companies today?

Optimism is a moral imperative for investors. If your investment case is sound and you’ve done your homework, you have to accept that at some point the market may prove you wrong for quarters and years on end. As an investor, you have to stay positive and be able to ride out those temporary dips. By the way, that’s when controlling your emotions starts to pay off. Could you have kept your cool in 2021 and 2022? Then there was nothing wrong. Even if you bought at the peak in 2021, you would have gotten a return of about 40% less than three years ago (Meta is now at $528). And that’s after the recent dip.

Are there still opportunities in technology stocks?

If you ask me if tech stocks are expensive, I would say yes. But there are good reasons for that as well. They consistently prove that they have strong growth prospects and that these companies can continue to grow. It remains one of the most interesting sectors, although the problem remains that everyone knows that now and that the tech sector is highly valued. If something goes wrong or growth slows down a bit, these companies can certainly breathe some air. So as an investor, you have to accept that there could be moderate declines of 50%, 66% or even 80%, as we saw in 2022. Something to keep in mind if you want to follow the current tech rally.