Investors have never been on board with the
company-formerly-known-as-Facebook's pivot to the metaverse. Its core
social media advertising business is facing a variety of competitive and
regulatory threats, but remains a profit and free cash flow machine. The
metaverse is just a pricey distraction with a highly uncertain payoff, critics
have argued.
That narrative ruled in 2022: Meta
Platforms' stock dropped 74% from its late-2021 record high
through early November of last year, incinerating hundreds of billions of
dollars in market value.
What a difference three months can make.
Since a disastrous third-quarter report that showed a stumbling ad
business, zero cost control discipline, and years of heavy R&D spending
ahead, management has seemingly listened to shareholders.
Late last year, Meta said it would cut 11,000
jobs and trimmed its outlook for expense and capital spending growth.
Going into this evening's fourth-quarter results, Meta stock had rallied about
74% since the start of November.
Meta's results
for the last three months of 2022, released after the market closed
today, showed a still somewhat shaky core business. Revenue of $32.2
billion was down 4% from a year ago. Earnings per share were down 52%, and
missed the Wall Street consensus estimate by a mile. Free cash flow dropped 58%
year over year, to $5.3 billion.
Daily active users across the company’s social
networks including Facebook, Instagram, and WhatsApp were 2.96 billion at the
end of 2022, up 5% from a year earlier.
But Meta continues to pare back its unpopular
spending plans and work to reignite profit growth. CEO Mark
Zuckerberg said in a statement that the company's
theme for 2023 is the "Year of Efficiency."
"Meta reduced its forecast for full-year
total expenses to between $85 billion and $95 billion, from a previous forecast
of $94 billion to $100 billion," Barron's Eric
Savitz wrote.
"The company now sees capital expenditures for the year in the range of
$30 billion to $33 billion, down from a prior estimate of $34 billion to $37
billion."
Much of the cash savings could go to share buybacks.
Meta unveiled a new $40 billion buyback authorization this evening, versus
a market value of just over $400 billion. That's on top of $6.9 billion of
buybacks completed in the fourth quarter and $10.9 billion left in its existing
repurchase program.
Investors liked what they heard. Meta shares
were up around 18% in after-hours trading this evening. With the move, the
stock has now doubled from its November 2022 low.
Read more from Eric on Meta's fourth quarter and reduced spending ambitions here.
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