Meta stock value soars 23% due to stock buybacks and cost cuts

The parent company of Facebook, Instagram and WhatsApp has gained $90 billion in market capitalization and boosted the Nasdaq

Mark Zuckerberg
Founder and CEO of Meta, Mark Zuckerberg, in a picture from 2019.ERIN SCOTT (Reuters)

Meta Platforms has soared on the stock market. What was already on the cards in Wednesday’s after-hours trading, was confirmed on Thursday, with shares rising of 23%. This is the largest rise Meta – the parent company of Facebook, Instagram and WhatsApp – has seen since July 2013. Investors are applauding the company’s cost-cutting targets and its share buyback plan. Both were presented along with the 2022 closing results, which report Meta’s first revenue drop in history.

The fourth-quarter revenue drop was, in fact, the largest ever recorded by the company, but somewhat less than what analysts were forecasting. Meta’s shares lost almost two-thirds of their value in 2022 and, as a result, these poor results, with a 41% drop in annual profit, were already taken into account. Investors and analysts were on the lookout for new signals from the company.

The revenue forecast for the first quarter (from $26 billion to $28.5 billion, compared to $27.9 billion for the same period in 2022) opens two doors at the same time: one leading to a return to growth and the other leading to a sharpening of declines. It does not, therefore, dispel the market’s doubts.

What has been more to the market’s liking are the targets for what Mark Zuckerberg, founder and head of Meta, has dubbed the “year of efficiency.” The firm has lowered its cost estimate for this year by $5 billion (to the $89-94 billion range) thanks to several cost-saving measures. It is also tightening its belt on investments, which it puts at $30-33 billion (instead of the previous estimate of $34-37 billion).

Much of these cost reductions come from the layoff of 11,000 workers, which Zuckerberg announced last November. Because of that and other restructuring costs, the company has written off an extraordinary $4.61 billion from the 2022 accounts, a year in which it had 86,482 employees, after raising its workforce by about 14,000 people, or 20%.

Along with cost savings, Meta has announced that it is extending its share buyback plan by $40 billion, a form of shareholder remuneration that has also been applauded by investors.

Meta’s stock market rise (of 23.3%) is the largest since July 2013, when shares rose 30%. In absolute terms, it is its largest increase in market capitalization, to the tune of $90-100 billion, depending on the time of the session.

The rise in Meta shares has boosted other stocks in the secto,r as well as the Nasdaq index, which is up more than 3% on a positive day for the stock markets. Investors believe that the cycle of interest rate hikes is coming to an end after the meetings of the Federal Reserve on Wednesday and the European Central Bank (ECB) on Thursday.

On Thursday, Amazon, Alphabet and Apple all report their own results, and analysts and investors will be watching closely for any messages about the future that they may deliver.

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