Meta Shares Leap 20% After Facebook Parent Tops Q4 Expectations, Pledges 2023 ‘Efficiency’

The results prompted a wave of analyst upgrades and price target hikes

facebook meta mark zuckerberg
Mark Zuckerberg's Meta avatar (Meta)

Shares of Meta Platforms skyrocketed 20% at the opening bell Thursday, after the Facebook, Instagram and WhatsApp parent posted better-than-expected results for the fourth quarter and CEO Mark Zuckerberg promised that 2023 would be a “year of efficiency.”

The stock added $30.31, or 19.8% to $183.43. Shares have more than doubled since hitting a low of $88.09 in early November.

After the markets closed Wednesday, Meta reported 4% growth in active daily users to about 2 billion.

Revenue for the period ended Dec. 31 and slipped 4% to $32.17 billion, above the $31.53 billion analysts, on average, were expecting.

Spending soared 22% during the quarter, to $25.77 billion, as Zuckerberg’s crews focused on building out the metaverse. But Wall Street cheered Zuckerberg’s promise for a newfound focus on containing costs in 2023 — a pledge for expenses to fall between $89 billion and $95 billion for the year, from $87.66 billion in 2022.

“We’re working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive,” Zuckerberg said during a conference call to discuss the results with investors on Wednesday. “There’s going to be some more that we can do to improve our productivity, speed and cost structure.”

Meta has already cut staff, announcing in November it would lay off 11,000 workers, or 13% of its staff, by the end of March. It recorded $4.2 billion in restructuring charges related to job cuts during the quarter.

Zuckerberg told investors the Menlo Park, California-based company also trimmed spending on real estate, as it consolidated its office footprint worldwide through subleasing, early lease termination and abandoning some office buildings. The company also canceled multiple data center projects.

The results prompted upgrades from Bank of America, which returned to a “Buy” on the stock, and Piper Sandler, which put an “Overperform” rating on its shares, the equivalent to “Buy.”

Bank of American analyst Justin Post also raised his price target on the shares to $220, pointing to an acceleration in U.S. advertising revenue and the growth of Reels usage, even as TikTok active users decline.

Piper analyst Thomas Champion said the magnitude of change coming out of the quarter warrants a more constructive rating, despite a difficult advertising market and no plans from the company to back down on its metaverse investment, according to market tracker

The company’s “cultural change” and focus on efficiency will lead to lower spending while its investments drive faster revenue and usage growth, Morgan Stanley’s Brian Nowak wrote in a note. He also raised his price target on the stock to $190 from $130.

Nowak’s price hike was one of at least 15 following the earnings release.

However, Needham analyst Laura Martin kept an “Underperform,” or “Sell,” rating on the stock, noting that Zuckerberg’s promises are positive, but the company’s fundamentals are still deteriorating, with first-quarter guidance calling for “negative growth.” She is also concerned that Reels is “cannibalizing” engagement time from its higher-monetization products.