Meta stock soars the most since 2013 thanks to Zuckerberg’s vision

(Bloomberg) — Meta Platforms Inc. is heading for its biggest single-day gain in nearly a decade after CEO Mark Zuckerberg laid out plans to make the social media giant leaner, more efficient and more determined.

Most read by Bloomberg

Zuckerberg, who spent the past year promising a distant future in a digital world called the metaverse, was more focused on immediate issues in a conversation with investors Wednesday, such as sending users the most relevant videos at the right time and finally generating significant revenue from messaging apps. He called 2023 “The Year of Efficiency”.

“We are working on simplifying our organizational structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive,” Zuckerberg said during the call. “There’s more we can do to improve our productivity, speed and cost structure.”

Meta, which is rebounding from its stock’s worst year ever, is in stark contrast to other tech companies whose stocks have been punished for disappointing forecasts. Snapchat owner Snap Inc., for example, fell 10% after forecasting its first quarterly revenue drop. The industry has experienced declining demand from advertisers, as well as changes to Apple Inc.’s iPhone privacy policy, making it more difficult to deliver targeted ads. But Meta countered the downturn with measures, including cutting 11,000 jobs, or 13% of the workforce, in November, the first major layoff in history.

The rise in the company’s stock is the biggest driver of the Nasdaq 100 on Thursday, adding more than 10% to the benchmark’s gains, according to data compiled by Bloomberg. The technology indicator is approaching a bull market as investors pour into growth stocks betting that the Federal Reserve’s rate hike cycle is nearing its end.

Shares of Meta jumped 24% to $189.54 at 10:41 am in New York.

AI strategy

In a phone call with investors on Wednesday, Zuckerberg said the company is using AI to improve the way content is recommended, a strategy aimed at making the platform more appealing to both users and advertisers. Digital ads make up the vast majority of its sales, especially from finance and technology clients. And while ad sales have fallen, the company has also pointed to some industries, including healthcare and travel, where businesses are spending more.

Fourth-quarter sales fell 4% to $32.2 billion, the third consecutive period of decline. However, the total beat analysts’ estimates, with Meta forecasting revenue of $26 billion to $28.5 billion for the first quarter, in line with the median forecast of $27.3 billion. Analysts predict that the Meta will return to growth after the current period.

On Tuesday, Snap was less optimistic, saying it expects sales to decline in the current period. CEO Evan Spiegel said the advertising slump appears to be bottoming out. “Demand for ads hasn’t really improved, but it hasn’t significantly worsened either,” Spiegel said on a conference call.

Read more: Snap CEO Spiegel says digital advertising downturn has leveled off

The job cuts at Meta came during a quarter that was otherwise an improvement for the company. Facebook, Meta’s flagship social network, currently has over 2 billion daily users, up 70 million from a year ago.

The company also increased share buyback authorization by $40 billion, adding to the $10.9 billion left over from previous share buyback programs. In the fourth quarter, Meta recorded $4.2 billion in restructuring costs related to job cuts.

Zuckerberg has spent tens of billions of dollars building the metaverse, a digital world where people can work and play. These efforts are still at an early stage, which means that most of the investment does not result in immediate returns.

However, the Menlo Park, California-based company said it will spend between $89 billion and $95 billion in 2023, less than Meta had previously forecast. This could help alleviate investor fears that the company is overspent on its VR ambitions.

Capital expenditures rose to $9.22 billion in the latest quarter. In contrast, in the fourth quarter of 2021, capital expenditure was $5.54 billion.

— With the assistance of Subrat Patnaik and Divya Balji.

(Corrects the capital cost figure in the last paragraph of the Feb. 2 article.)

The most read edition of Bloomberg Businessweek

© 2023 Bloomberg LP

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button