Facebook parents Meta Platforms (META) in the process of restructuring and slashing 21,000 jobs to achieve what Chief Executive Mark Zuckerberg called a “year of efficiency,” the question now is, will investors show their agree by buying Meta stock?
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The answer, so far, is a resounding yes.
Since early November, when the company announced it would cut 11,000 jobs, Meta stock has risen about 135%. The run-up got another push on February 1 when the company reported fourth-quarter results. Zuckerberg then said that 2023 would be a “year of efficiency.”
That’s also when Meta announced a massive $40 billion stock buyback plan.
“Meta faces several headwinds in 2022, including issues that remain from previous years, and an onslaught of new challenges,” Monness Crespi Hardt analyst Brian White said. in a recent note to clients. “Meta is now taking heroic steps to improve its cost structure.”
All Social Media Companies Struggle
Meta, like all social media companies, is struggling due to a sharp decline in advertising. In addition, these companies are reeling from macroeconomic concerns, fears of a recession and higher interest rates.
Meanwhile, Facebook has spent billions on a risky bet to build the metaverse, a planned virtual reality world.
But the cost-cutting efforts underway have outpaced Meta’s metaverse efforts, which remain as expensive as ever. Reality Labs, the division of Meta that builds its Quest headsets and future augmented glasses, reported an operating loss of $13.72 billion for 2022.
“The past year has been a humbling wake-up call,” Zuckerberg said in March. At that point, the company announced plans to cut an additional 10,000 jobs.
“The global economy is changing, competitive pressures are growing, and our growth has slowed dramatically,” he said.
Meta stock analysts worry that Zuckerberg has cashed in on his metaverse dreams with reckless abandon and has little to show for it. That’s been a concern since Facebook changed its corporate name to Meta in the fall of 2021.
Worried About Big Investments
‘We are concerned about META’s massive investment in Metaverse.
“META is talking about returns on Metaverse investments in terms of 2030, well beyond the time frames of most investors,” he said. “There is no need to be in META now if spending on Metaverse will only pay off in 2030.”
“In the back of our minds, we are concerned that META’s massive investment in creating Metaverse indicates that it fears there are risks to its core business models in history,” Martin said.
TD Cowen analyst John Blackledge wrote in his note to clients: “We view META as the leading social advertising platform, becoming a more strategic part of an advertising campaign.”
Blackledge recently raised his price target on Meta stock to 190 from 175. In addition, he gave it a market perform rating.
“Meta has built a strong mobile capability, and we anticipate additional monetization levers in 2022, including video advertising,” Blackledge said. “We think there will be other ad formats and products that will be introduced in the longer term.”
Meta Stock: 3.7 Billion Active Users
Baird analyst Colin Sebastian recently raised his price target on Meta to 220 from 205, with an outperform rating.
“As the dominant social network, Meta has an almost unprecedented level of network effects that secures its position as the leading social network in the world,” said Sebastian.
Meta has a combined 3.7 billion monthly active users. That includes Facebook and Instagram’s photo sharing plan. It also includes the messaging platform Messenger and the multifaceted communication platform WhatsApp.
“Meta has assembled the most comprehensive user profile database in existence,” Sebastian said. “That presents a significant opportunity to monetize a significant portion of the multibillion-dollar market.”
But the Meta seems undaunted, at least for now. The company stuck to its guns even after announcing a second round of layoffs in mid-March.
“I believe we are working on some of the most transformative technology our industry has ever seen,” Zuckerberg said.
“Our biggest investment is in advancing AI and building it into each of our products,” Zuckerberg said. “We have the infrastructure to do this on an unprecedented scale. I think the experiences it can create will be incredible.”
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