Meta Platforms has skyrocketed in the stock market. What was already noted on Wednesday during the trading hours was confirmed this Thursday with a gain of more than 25%, the second largest in the stock market history of the company, which owns Facebook, Instagram and WhatsApp. Investors welcome the company’s cost reduction targets and share buyback plan. Both were presented along with the 2022 financial statements, which attested the first revenue decline in Meta’s history.
The fourth-quarter revenue decline was actually the biggest on record for the company, but slightly less than analysts had been predicting. Meta’s shares lost nearly two-thirds of their value in 2022, and as such, those poor results were discounted with a 41% drop in annual earnings. Investors and analysts followed the company’s new signals closely.
The sales forecast for the first quarter (from 26,000 to 28,500 million dollars compared to 27,900 in the same period in 2022) simultaneously leaves two doors open: the one that will lead to a return to growth and the one that will lead to a return to worsening falls. Thus, the market is not freed from doubts.
What they liked best were the goals of what Mark Zuckerberg, founder and head of Meta, has dubbed the “Year of Efficiency.” The company has lowered its cost estimate for this year by 5,000 million (to 89,000-94,000 million) thanks to austerity measures. Belts are also being tightened when it comes to investments, which are between 30,000 and 33,000 million (instead of the previous estimate of 4,000 to 37,000 million).
Much of the cost savings comes from the layoff of 11,000 employees that Zuckerberg announced last November. For these and other restructuring costs, the company recorded an extraordinary charge of $4,610 million in its 2022 financial statements, the year in which it employed 86,482 people, after increasing its workforce by approximately 14,000 people, or 20%.
In addition to cost savings, Meta has announced plans to add $40 billion to its stock repurchase plan, a form of shareholder compensation also welcomed by investors.
The rise in the meta stock market (27% two hours after the close) is the largest since the price rose 30% in one session in July 2013. In absolute terms, this is the largest increase in market capitalization of the order of $100,000 million, ever by the time of the session.
The surge in shares of the Mark Zuckerberg-founded company has boosted other stocks in the industry and the Nasdaq index, which is up more than 3% on a good day for the stock market. Investors believe the rate-hike cycle is nearing its end following Wednesday’s Federal Reserve and Thursday’s European Central Bank (ECB) meetings.
This Thursday, Amazon, Alphabet and Apple are all reporting results and analysts and investors will be very alert to any news they may release about the future.
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