Zuckerberg’s Fortune Soars Amid Meta Layoffs
HIGHLIGHTS:
- Meta Shares Soar to Their Highest Level Since 2013
- The CEO informs investors that he will cut middle management.
- Social media behemoth expects user feeds to get better because to AI investments.
The stock of Meta Platforms Inc. has had a stunning reversal, bringing back memories of the glory days of big tech. The shares of the company that owns Facebook rose as much as 26%, its most significant intraday gain in over a decade, helping it momentarily cross the $500 billion market capitalization threshold. The most recent rally follows Mark Zuckerberg’s Wednesday promise to make the social media business leaner. At least three brokerages upgraded their recommendations on the company following the earnings announcement, which was well-received by analysts.
The increase occurred precisely one year after Meta experienced the most significant single-day stock market fall in history. The company’s market value has increased by roughly $260 billion since its bottom in November thanks to Thursday’s advances, solidifying its position as the S&P 500 Index’s top-performing stock over the past three months. According to data, the social media behemoth is increasing its market cap by roughly $90 billion, its most significant ever single-session market value gain.
Ross Sandler, an analyst with Barclays Plc, raised the price target for META shares from $165 to $260 in a note, saying, “In future years, we will probably look back to 2023 as the sentiment shift for META shares.” Without question, there was room for improvement following Meta’s disappointing debut as a public company. The owner of Facebook plunged 26% last year due to subpar financial statistics, wiping off over $250 billion in market value—the worst loss in stock market history.
The stock is currently approximately 50% below its 2021 peak, but analysts believe the company’s most recent update strengthens the bull argument. According to Morgan Stanley analyst Brian Nowak, the “dramatic sea change” at Meta prompted him to raise his stock’s price objective from $130 to $190. According to a note by Nowak, “Meta’s cultural change centred on efficiency” is resulting in lower costs while investments are accelerating revenue growth.
On Zuckerberg’s Vision, Meta Shares Soar to Their Highest Level Since 2013
In a call with investors on Wednesday, Zuckerberg, who has spent the past year hyping a distant future in a virtual universe known as the metaverse, was more concerned with pressing issues like sending users the most pertinent videos at the right time and finally generating significant revenue from messaging products. 2023 was dubbed the “Year of Efficiency” by him.
On the call, Zuckerberg stated, “We’re working on simplifying our organizational structure and reducing some layers of middle management to make decisions more quickly, as well as deploying AI capabilities to assist our engineers in being more productive. We can do more to raise our production, efficiency, and cost structure.
In stark contrast to other IT businesses whose stocks have been punished for having negative outlooks, Meta has recovered after having its worst trading year ever. For instance, Snap Inc., which owns Snapchat, fell 10% after forecasting its first-ever quarterly sales decline.
In addition to a change in privacy policies on Apple Inc.’s iPhone that makes it more challenging to provide tailored ads, the industry has experienced a fall in advertiser demand. But Meta has taken steps to combat the downturn, including its first-ever major layoff in November, which resulted in the elimination of 11,000 jobs, or 13% of the workforce.
According to data provided by media, the company’s stock jump is the primary driver of the Nasdaq 100’s gain on Thursday, adding more than 10% to the benchmark’s ascent. As investors pour money into growth firms, betting that the Federal Reserve’s rate hikes cycle is ending, the tech-heavy gauge is edging closer to joining a bull market. At 10:41 AM on Tuesday in New York, Meta shares soared 24.1% to $189.54.
AI Approach
In a call with investors on Wednesday, Zuckerberg stated that the firm is utilizing AI to enhance its content recommendations to increase the platform’s appeal to users and advertisers. Most of its sales come from digital ads, particularly from clients in the financial and technological sectors. Additionally, despite the decline in ad sales, the corporation mentioned other sectors where expenditure is increasing, such as the tourism and health sectors.
Sales decreased 4% to $32.2 billion in the fourth quarter, marking the third quarter of reductions. Nevertheless, the sum exceeded analysts’ predictions, and Meta forecasted first-quarter revenue of $26 billion to $28.5 billion, in line with an average projection of $27.3 billion. Analysts anticipate that Meta will resume growing after the present phase.
On Tuesday, Snap provided a less optimistic view, stating that it anticipated sales to drop immediately in the future. According to CEO Evan Spiegel, the ad slump appears to be bottoming out. On a conference call, Spiegel stated, “Advertising demand hasn’t substantially improved, but it hasn’t gone considerably worse either.”
The company had a better quarter overall, although Meta’s layoffs happened during that time. With an increase of more than 70 million users from a year ago, Facebook, Meta’s leading social network, currently has more than 2 billion daily users.
A further $40 billion was added to the company’s stock repurchase authorization, bringing the total to $40.9 billion, including the $10.9 billion from earlier repurchase operations. As a result of cutting jobs, Meta had to take $4.2 billion in restructuring costs in the fourth quarter.
Facebook founder Mark Zuckerberg had spent millions of dollars creating the metaverse, a virtual place where individuals may work and have fun. These projects are still in their infancy. As a result, a sizable amount of investment must produce quicker results.
However, the Menlo Park, California-based business predicted 2023 spending would be $89 billion to $95 billion, which is lower than what Meta had anticipated. Investors’ worries that the corporation is overpaying for its virtual reality goals might be lessened. In the most recent quarter, capital spending climbed to $32 billion. Contrarily, capital expenditures in the fourth quarter of 2021 totalled $5.54 billion.
edited and proofread by nikita sharma
