Back from the edge of the metaverse, social media giant Meta Platforms (META) soared more than 20% in after-hours trading on Wednesday as investors renewed their confidence in CEO Mark Zuckerberg. Helping the situation was a big revenue beat, as well as a massive $40B share buyback program. Meta also released a forecast for FQ1 revenue that could reach as high as $28.5B, which would top sales seen during Q1 of 2021 (and was right before Apple’s (AAPL) privacy measures heavily dented its ad revenues).
SA commentary: “The social media company continues to heal by reining in wild expense growth,” wrote Marketplace author Stone Fox Capital, adding that the tech giant trades closer to ~15x updated ’23 EPS targets with eventual upside from reductions in Reality Labs spending. “Shares are not as cheap as they were in 2022, following a 75% share price increase from the 52-week low,” warned fellow Marketplace author Jonathan Weber, while Livy Investment Research gave another quick take after the earnings report, citing progress and outstanding executions risks.
On a conference call with analysts, Zuckerberg called 2023 the “year of efficiency,” with the company “focused on becoming a stronger and more nimble organization.” Meta has already laid off a “substantial majority” of the approximately 11,000 employees it said it would let go this past November as the firm continues to right-size itself. The social network also ended the period with 2B daily active users, which was better than estimates, and has made progress on its artificial intelligence discovery engine and strong engagement from Reels.
Into the verse: In a blow to the Federal Trade Commission and its Chairwoman Lina Khan, a federal judge ruled yesterday that Meta can buy virtual reality company Within Unlimited. The decision suggests that Meta can now board the M&A train to build up its grand vision of the metaverse, similar to its strategic purchases of Instagram and WhatsApp that allowed it to dominate the social space. It’s a long-term bet, with Meta’s Reality Labs unit losing $4.3B during the quarter, bringing its total loss to $13.7B for 2022.