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Meta Platforms Shares Surge on Cost Cuts, Stock Buyback

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Meta Platforms Inc.

META 22.56%

shares are on pace for their best day in nearly a decade after the company embraced investor-friendly moves including boosting its stock through a $40 billion buyback and cutting expenses in the face of increased competition. 

Shares of the social-media company jumped 23% to $188.02 in afternoon trading Thursday and are up about 60% year to date. The stock is on pace for its largest percentage increase since July 2013, when it rose nearly 30%. 

Meta’s stock is the best performer Thursday on the tech-heavy Nasdaq after being bruised much of 2022, when a whirlwind of factors weighed on shares, including greater competition from TikTok, ripple effects from

Apple Inc.’s

AAPL 3.03%

privacy measures that cut off access to data and a slowdown in advertising spending.

“My main focus is on increasing the efficiency of how we execute our top priorities,” Chief Executive

Mark Zuckerberg

said on an earnings call with investors Wednesday. “I think that there’s going to be some more that we can do to improve our productivity, speed, and cost structure.” 

Meta posted better-than-expected fourth-quarter revenue of $32.17 billion, despite its third consecutive quarter of declining sales, and a net income of $4.65 billion. The consensus estimate from Wall Street was for revenue of $31.55 billion and net income of $6.02 billion.

Analysts noted that the company’s cost-cutting marks a departure from previous quarters, when the company warned of climbing expenses and greater losses expected at its unit overseeing its metaverse ambitions. Mr. Zuckerberg said on the call with analysts that the company would take measures including removing layers of middle management and being “more proactive about cutting projects that aren’t performing or may no longer be as crucial.”

“We expect this recently found discipline to drive a stronger and more nimble organization over the long-run, not just for the next 12 months,” J.P. Morgan’s

Doug Anmuth

and Katy Ansel said in a note.

The Menlo Park, Calif., company said it expects its 2023 expenses to be between $89 billion and $95 billion, lower than its previous outlook of between $94 billion and $100 billion. It also forecast capital expenditures to fall between $30 billion and $33 billion, down from its prior guide between $34 billion and $37 billion.

“The positive surprise was the level of reduction in opex and capex guidance…demonstrating significant commitment to being disciplined going forward,” said Mizuho Securities USA LLC’s

James Lee

and Wei Fang in a note. 

Meta also showed upside in other areas, including an improving environment for online ad spending in the U.S. and Europe and better monetization from its short-video feature Reels, according to Bank of America analysts, which should lead to faster revenue growth.

In other cost-cutting measures, the company in November announced a 11,000-worker layoff echoed by other technology companies looking to shave expenses following less-than-stellar growth.

Meta is putting its money toward efforts such as artificial intelligence to adapt to Apple’s privacy changes, an effort that could enable the company to make better predictions based on less data, The Wall Street Journal has reported.

Another potential tailwind for Meta’s stock could be increased scrutiny of TikTok in the Republican-controlled House of Representatives alongside Democrats also voicing concerns. What’s more,

Snap Inc.

this week warned investors of a sales drop as it also struggles to revive growth.

Meta reported a milestone of 2 billion daily active users for Facebook in the quarter ended Dec. 31, a 4% year-over-year increase. Its family of apps had 2.96 billion daily active people, a 5% increase year over year.

Write to Denny Jacob at [email protected]

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