Meta shares soar 23% on revenue beat, efficiency drive
Shares in the social media empire have more than doubled since November. Morningstar sees plenty of upside yet.
Mentioned: Meta Platforms Inc (META)
Shares in Meta Platforms (META) - which owns Facebook, Instagram and WhatsApp - surged more than 20% as its fourth-quarter revenue result beat analysts’ expectations. The technology giant also announced a further $56 billion buy back, and CEO Mark Zuckerberg signaled his sweeping efficiency drive would continue.
Meta's Nasdaq-listed shares closed up 23% at $188, the highest price since June 2022.
Beleaguered by pessimism about tech stocks in a high-interest-rate environment and doubts about its Metaverse strategy, the stock had troughed at $88.91 in early November.
"Meta reported better than expected fourth-quarter results despite currency headwinds, macro uncertainty, and deceleration in overall digital advertising growth,’’ Morningstar analyst Ali Mogharabi said in a note after results were announced Wednesday night.
Mogharabi also praised cost-control efforts while user growth accelerates, and maintained his $260 fair value, about 36% higher than Thursday's opening level.
In its earnings release, Meta projected total costs in 2023 at $89-95 billion, down from a previous range of $95-100 billion, reflecting lower growth in payroll expenses and cost of sales. Last November, Meta announced the layoff of 13% of its staff, at the time the most drastic headcount reduction in the downturn that defined 2022 for big tech.
This effort appears to continue, as Zuckerberg declared a "Year of Efficiency’’ during a call with analysts, announcing plans to remove layers of middle management and flatten Meta’s organisational structure.
Mogharabi maintains his wide-moat rating for Meta, reflecting the firm’s massive user base and resulting wealth in demographic data, as well as network effects across Facebook, Instagram, Messenger and WhatsApp.
His "Exemplary’’ capital allocation rating is reinforced by Meta’s continuing aggressive buybacks—a total of $27.9 billion in 2022, followed by a further $40 billion increase to its authorization on Wednesday.
Meta Platforms Stock at a Glance
- Current Morningstar Fair Value Estimate: $260
- Meta Platforms Stock Star Rating: 5 stars
- Economic Moat Rating: Wide
- Moat Trend Rating: Stable