“I think there’s a real place in the world for the metaverse,” McDermott said on Yahoo Finance Live (video above). “It is real. But even if you do spend time in the metaverse, you always have to come back down to Earth, where the real people live, and actually execute your business plan.”
McDermott, who formerly served as the longtime CEO of SAP, explained that the metaverse will be helpful in driving consumer and enterprise spending.
“You’re always going to see this interdependency between a metaverse world and the real world, where business takes place,” McDermott added. “And that’s where we come in. We play both places.”
At present, investors do not share McDermott’s passion for the metaverse.
Meta (META) stock crashed 22% on Thursday as the Facebook and Instagram owner continued to spend aggressively to build out its metaverse. Execs signaled that the torrid pace of spending will continue into 2023.
The social media platform outlined expenses would grow about 13% year over year for the fiscal year 2023, well above the Street’s forecast of 7%.
“With a new CFO in place, some may argue the company is being overly conservative,” Benjamin Black, analyst at Deutsche Bank, wrote in a note to clients. “And while Meta typically lowers [operating expenditure] guidance throughout the year (as they did so far year to date), the elevated expense outlook is the wrong number at the wrong time for investors.”
Meta’s revenue outlook wasn’t very good either: Fourth-quarter revenue guidance came in between $30 billion and $32.5 billion, whereas Wall Street was expecting $32.2 billion.
Although Meta announced that it will be pacing Reality Lab investments after 2023, the company acknowledged that spending will be significantly higher next year.
“Meta’s results were an absolute train wreck that speaks to pervasive digital advertising doldrums ahead for Zuckerberg & Co. as they make the risky and head scratching bet on the metaverse,” Wedbush analyst Dan Ives told clients in a note.