-Shares surge after upbeat sales forecast and share buyback
-Investors welcome belt tightening and productivity focus
-Metaverse losses expected to increase in 2023
Shares in Facebook parent Meta Platforms (META:NASDAQ) surged 20% in aftermarket trading after forecasting stronger than expected first quarter revenues, boosting productivity and increasing share buybacks.
The jump in the shares comes after they have lost more than 60% of their value over the last two years.
The new guidance topped analysts’ estimates of $27.14 billion according to Refinitiv data and if delivered would see the company returning to year-on-year growth.
After spending $27.9 billion on share buybacks in 2022 the company intends to increase the pace to $40 billion.
FOCUS ON PROFITABILITY WELCOMED BY INVESTORS
Meta lowered guidance on capital expenditures by around 11% to between $30 billion and $33 billion as it moves to a more efficient data centre architecture.
The company is also looking to rein in operating costs and now expects them to be around 3% lower at between $89 billion and $95 billion based on a slower than anticipated growth in payrolls. Meta announced 11,000 job cuts in November 2022.
Fourth quarter revenues to 31 December of $32.1 billion were down 4.5% compared with a year ago but above consensus estimates of $31.53 billion according to Refinitiv data.
Profits dived after the company took a $4.2 billion restructuring charge related to job cuts and cancelled data centres. Net income more than halved to $4.7 billion or $1.76 per share, below market forecasts of $2.22 per share.
The company’s Metaverse unit lost $4.8 billion in the quarter taking full year losses to $13.7 billion. Bigger losses are expected in 2023.
WHAT ARE THE EXPERTS SAYING?
Investment director at AJ Bell Russ Mould commented: ‘A less than generous interpretation of Meta’s latest quarterly results would be “sorry the numbers aren’t great, here’s a giant share buyback as compensation”.
‘However, even judged on the figures themselves, Meta came out looking better than it went in. Yes, revenue declined, but sales were still better than downbeat expectations.
‘Promising that 2023 will be a year of “efficiency” was always likely to go down well with investors concerned about the largesse in spending directed towards the unproven potential of the metaverse.
‘What was particularly significant is that the narrative around its social media platforms becoming increasingly irrelevant was countered successfully, as the volume of active users across the likes of Instagram, Whatsapp and Facebook grew materially to more than 3.7 billion.’
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Tom Sieber) own shares in AJ Bell.
