Why Meta is rising in the stock market

At the Wall Street open on Thursday, Meta shares rose 24%, a performance not seen in the past decade. However, a day earlier, the parent company of Facebook, Instagram and WhatsApp reported poor performance again during the presentation of its latest financial results for 2022. the same period of the previous year. Worse, its annual turnover fell 1% to $116.61 billion, a first since its 2022 IPO.

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But during the same conference call, Meta announced a financial move that was particularly well-received by investors: a $40 billion share “buyback.” In other words, the company itself will buy back the shares from its shareholders. The transaction allows it to raise its price, which is down more than 64% in 2022 – the equivalent of $600 billion – to pay investors who want to exit, and to revise its dividend payout.

Meta sticks his head out of the water

“Buy back” is not the only positive signal sent by the Meta. Not only did the company beat analysts’ expectations for the quarter, but forecasts for the first quarter of 2023 did the same. With expected revenue of $28.5 billion, the company expects to outperform in 2021, which is the last before Apple imposes restrictions on personalized ads for iPhones, MacBooks and iPads.

These measures have severely damaged Meta’s business model, which derives the vast majority of its revenue from advertising on Facebook and Instagram. The group’s tools could no longer reach a large portion of Apple product users. The company immediately predicted that the changes would reduce its turnover by $10 billion by 2022. And for good reason: more than 15% of smartphones are iPhones, which exceeds 50% of the American market.

Added to this unexpected obstacle was the failure of the company’s turnaround in the metaverse and gloomy economic environment amid inflation and the component crisis. But signs of progress are beginning to appear. Suffering from market turmoil like no other Gafam, Meta built its recovery on the one hand developing new identity advertising tools and on the other hand promoting Reels, a short video format. The goal: finally adapt to Apple’s advertising changes and resist the relentless rise of TikTok.

according to The Wall Street Journal, Meta management credited its new recommendation algorithms with a 20% increase in time spent on Reels and a double-digit increase in the number of impressions on its ads. A while ago, Instagram and Facebook received a major update to integrate short videos directly into user feeds, and no longer in a separate tab. This change caused an outcry from users, symbolized by the message of Kylie Jenner, one of the most followed faces of Instagram.

Cut costs

With growth at half-mast, Zuckerberg is pulling the other lever to stay profitable: cutting costs. Last November, Meta announced that it was laying off 11,000 employees, or 13% of its workforce. The leader recalled that this measure was to compensate for the fact that the company had “ recruited very aggressively ” during covid.

But he would still consider taking some out.” middle management layers Gaining efficiency will be synonymous with additional cuts. It promised to be meta” is more proactive in cutting projects that are not viable or have disappointing performance “.

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While Meta’s momentum didn’t increase, the company still posted $4.7 billion in profit for the quarter. Admittedly, that number is down 55% from 2021, but it ends a historic three-quarters of profit declines. After all, Meta can still count on more than 2 billion daily users on Facebook, up slightly from stagnation, and more than 3.7 billion across all its apps.

Problem: The underlying causes of Meta disease are still unsolved. Reality Labs, which is expected to become the company’s core business in the medium term, continues to perform below expectations. Revenue in the fourth quarter was $727 million, down 17% from a year earlier, while Meta introduced new virtual reality headsets to the market and generally offered a larger range of services. Bottom Line: Reality Labs posts a loss of 4.3 billion for the quarter after losing 3.7 billion and 2.6 billion in the previous quarters…