Meta Capital Expenditure Cut Plans Sparks Stock Turnaround
A bid to make social networking giant Meta Platforms leaner is the catalyst that is propelling its stock higher in the market. Barely a year after suffering its biggest loss in a single day, the stock is surging on huge volume amid growing confidence about the company’s long-term prospects. Shares rallying by more than 20%, the biggest intraday in more than a decade, underscores how investors are increasingly jostling for positions in the stock.
Meta Stock Rally
Meta stock has already added $237 billion in market value since its November lows thanks to the renewed buying spree. Moreover, since November of last year, the stock has rallied by more than 100% affirming its status as one of the best-performing stocks in the S&P 500.
The explosive move is already eliciting suggestions of flashes of big tech heydays. The likes of Amazon, Tesla, Apple and Google are also flying high, signaling the market might have bottomed out after a roller-coaster 2022.
Zuckerberg Cost Cut Plans
Facebook’s fortunes and sentiments in the market have been bolstered by a plan by Chief Executive Officer Mark Zuckerberg to make the company as leaner as possible. The remarks follow a string of layoffs and a move by the company to shelf some ambitious projects.
Zuckerberg has pledged to focus on efficiency at the social networking giant. He has already announced plans to lay off 11,000 employees and placed a broad hiring freeze. He has also announced a plan to reduce capital expenditures as part of the new plan amid a push to boost share repurchases by $40 billion. Capital expenditures for the year are expected to range between $30 billion and $33 billion.
Over the years, the social networking giant has invested heavily in growth, focusing on emerging technologies such as virtual reality, blockchain and artificial intelligence. Following a brutal year that saw the company lose more than $600 billion in market value, the language has changed, and the company has opted to go slow on spending.
A move to cut back on an ambitious project has excited Wall Street, which explains the blockbuster move in the market. The stock has rallied by more than 20% despite delivering its third straight quarterly decline in revenue at $32.2 billion. When the company delivered disappointing results at a time like this last year, the stock plunged by more than 26%, a move that saw more than $250 billion in market value wiped out.
It also posted a sharp 55% decline in profits that landed at $4.7 billion for the three months ended 2022. The disappointing results come as the company faced broader economic uncertainty and heightened competition in the social media market.
While Meta stock is still down by about 60% from its 2021 highs, it remains on course to recoup a good chunk of the losses amid renewed investor interest in tech stocks. A move by the Federal Reserve to go slow on interest rate hikes and the prospect of cutting later in the year continues to fuel demand for tech stocks. Consequently, analysts have started hiking their price target on Meta. Morgan Stanley analyst, Brian Nowak, has hiked his price target from $130 to $190, reiterating that a cultural change at the company should lead to lower costs and drive faster revenue growth.