Meta Platforms is known for owning high-interest platforms worldwide such as Facebook, Instagram, and Whatsapp. For several months, the company suffered problems due to the global economic situation. The company’s costly investment in the Metaverse shows no signs of paying off in the near future; and on top of that, Meta was going through a strong struggle with direct competitors such as TikTok.
After hitting a 52-week low, Meta Platforms’ stock has rallied 164% and the latest quarterly report filed boasts notable achievements in all areas of the business. With the decision to refine its core platforms, Meta optimized profitability and abandoned illusions based around the metaverse; with this, the company’s financials are only expected to improve for the remainder of the year. For this reason, feelings towards the company have completely changed and Wall Street specialists have good expectations.
The Die Hard of social media
Regardless of all the inconveniences Meta went through, the company will always have users on its platforms. In fact, it is likely that more than a third of the world’s population uses Facebook, Instagram, or Whatsapp because they are social networks that attract more and more users.
There were rumors that Facebook was going to disappear due to factors such as the deletion of user accounts; however, in the results presented for the first quarter of 2023, Meta reached the milestone of accounting for 2.99 billion monthly active users for Facebook, 2% more than in the same period of the previous year, and 3.81 billion monthly active family members (users across all platforms), 5% higher.
Additionally, the company increased its growth margin thanks to Reels. According to Mark Zuckerberg, Reels are being shared more than 2 billion times daily, and their shares have doubled in the last six months. Meta claims that the introduction of Reels has resulted in a 24% increase in the amount of time people spend on Instagram.
In part, the good service can be explained because the company integrated artificial intelligence into its product and it is already actively working. As a user browses through Reels, 40% of the content is recommended by AI. These suggestions improved monetization, with efficiency gains of over 30% on Instagram and over 40% on Facebook on a quarter-over-quarter basis.
Let’s talk financials
In part, Meta’s growth has been slowed by the downturn in the advertising sector. Despite the economic problems, Meta is currently posting record ad impressions, with revenue growth of only 3%. As the level of ad spending rises, the company’s revenues could soar.
The company also decided to stop giving so much importance to the development of the Metaverse and returned the main focus to its main digital platforms. Meta took advantage of the technology that has become fashionable over the past few months, and invested in generative artificial intelligence.
In addition to a positive outlook for revenue growth, Meta is expected to experience solid earnings growth in the future due to its ongoing cost-cutting efforts. However, in the near term, the company is likely to face significant impacts on its results due to restructuring expenses related to recent layoffs.
Faced with this situation, CEO Mark Zuckerberg made crucial decisions to save the future of his company. Since November last year, Meta opted to save money on personnel costs, since then, there have been around 21,000 jobs cut.
During the first quarter, Meta faced large pre-tax restructuring charges totaling $621 million related to last year’s layoffs. By the end of this year, the company is estimated to incur a total of $1 billion in pre-tax severance and related personnel costs (of which $523 million was recognized in the first quarter of 2023). These high restructuring charges impacted profitability in the quarter, reflected in a 19% decline in earnings per share to $2.20 compared to the first quarter of 2022.
Is Meta stock a buy?
Few stocks have been as hot as Meta Platforms in 2023. Shares of the social networking company have doubled in just four months, and several are wondering if it’s still safe to buy or even hold. Wall Street specialists rate them with a “Strong Buy” rating, at $277, the average target price for Meta shares implies a 19% upside potential.
As the year progresses and less than half of the total outstanding restructuring charges are recognized, in addition to expectations of accelerated revenue growth, analysts expect earnings per share to continue to grow to $11.32 in 2023, representing a 31.8% year-over-year increase.
Meta is scheduled to eliminate extraordinary restructuring costs and operate with a significantly reduced workforce. This has led Wall Street to forecast an additional 23% increase in Meta’s earnings per share by 2024, reaching $13.93.
Despite the recent 164% rise in Meta Platforms’ share price, analysts believe the stock is still undervalued due to its future growth potential.
What do you think of Meta Platforms’ present? Do you think anything could happen to slow down its impending growth?
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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.)
