Despite all the novelty that the metaverse has brought with it, this has led Meta to have problems with its finances; however, lately, the company has made a series of decisions that gradually captivate investors’ interest again.
Last year, the company had losses of $13.7 billion and its stock plummeted for meddling too deeply with the metaverse. Mark Zuckerberg focused his company on developing this series of interconnected online worlds where users can communicate and interact with each other.
This innovative idea has led other entrepreneurs like Tim Cook, Apple’s CEO, to think about it. It is expected that Apple’s next big product would be an augmented reality or virtual reality headset. “It’s the idea that there’s an environment that can be even better than the real world: overlaying the virtual world can be an even better world,” the Apple CEO said.
Bye-bye, metaverse
Meta Platforms’ new decisions have brought its shares back into demand by investors. The company dropped the vague “metaverse aspirations” and focused on prioritizing the growth of its core platforms, as well as reducing overspending. This caused its stock value to soar 146% since hitting its 52-week low of $88.09 in just five months.
Meta’s main goal is to maximize profitability. Tech giants used to be oversubscribed. Too many people opted to do “fake work,” rather than anything meaningful to the bottom line.
In November last year, the company announced it would lay off more than 11,000 employees, about 13% of its workforce at the time. Not satisfied with that, in early March, the company went through a second round of layoffs. Another 10,000 workers were affected this time, again 13% of its workforce. Eventually, CEO Zuckerberg said Meta planned to close an additional 5,000 positions that had not yet been filled.
“Companies are looking for efficiency and seeing that not only layers but also these kinds of inefficient and subjective performance structures are no longer necessary,” said Anna Tavis, a professor at New York University’s School of Professional Studies. “There are some human obstacles in the way because there has to be a change in mindset,” she added.
Getting back to the beginnings
With a reduction of more than a quarter of the workforce, the company finally settled on a shift in focus to core platforms. All indications are that the metaverse was sidelined because there hasn’t been anything new regarding this virtual world for a long time and also, Meta recently shut down the metaverse platform it acquired a couple of years ago.
During this process of change, the company’s main platforms have surprised with their performance. For the past decade, many have said that Facebook is coming to an end because no one uses it anymore; however, the data says otherwise. The social network continues to be a sensation and recently reached the milestone of surpassing two billion daily active users.
At the end of December, Facebook had 2.96 billion daily active users, which also suggests a 2% year-on-year increase.
On top of that, Meta is looking to expand and the main avenues they are focusing on are Instagram Reels and the monetization potential of WhatsApp.
Although the company is going to face significant expenses in terms of restructuring and other costs related to staff layoffs, the focus on its core platforms will have a positive impact going into the remainder of 2023.
Is Meta stock a good option?
On Wall Street, they rate Meta shares with a “Strong Buy” rating. At $231.77, there is an upside potential of 7.2%.
For a more forward-looking analysis, specialists assure that Meta will have an earnings per share estimate for this year of around $9.67; that is, an increase of 12.6% over 2022. Added to that is the potential growth of 26.3% and 19.8% in earnings per share expected in 2024 and 2025, respectively.
After Meta’s strong recovery, do you think it’s doing the right thing by taking the focus off the metaverse? Do you think it will face any setbacks along the way?
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(Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.)
