Mark Zuckerberg finally gave up. Founder and CEO of meta pads Last Wednesday, the company announced that it will cut about 11 thousand jobs, which will reduce the number of employees by 13%. Shares of the company, which have been falling all year, rose 6.8% on the news. It recovers 27% from a five-year low of $88 on November 2, indicating that the company matrix Facebook, Instagram and WhatsApp You have finally accepted that you must take steps to support your business.
The Shares tumbled 25% after showing their quarterly results, This is largely due to the staggering predictions of rising capital and operating expenses by 2023. A few days before Meta announced its accounts, the founder of Altimeter Capital, Brad Gerstner, He wrote an open letter to Zuckerberg urging him to cut spending. “Dead entered the surplus land,” he said. Too many people, too many ideas, too little urgency. on board.
Wednesday’s announcement suggests that Zuckerberg is finally taking care of investor concerns, to the relief of shareholders and analysts alike. “At the beginning of Covid, the world quickly moved to the Internet and the rise of e-commerce “It led to significant revenue growth,” Zuckerberg explained in a letter to Meta employees. “Many people expected this to be permanent acceleration that will continue even after the pandemic is over. I did too, so I made the decision to significantly increase our investment. Unfortunately, this was not as expected.”
CEO of Meta He mentioned that not only online commerce has returned to previous trendsInstead, a weak economy, increased competition, and “missing advertising signals” brought in far less profits for the company than it had expected. “I was wrong and I take responsibility”He confessed.
The The question investors now face is whether Zuckerberg is doing enough To face the new reality of the company, which includes more intense competition for advertising with competitors such as TikTok, Amazon, Apple and Netflix, among other things. The advertising environment is slowing and the continuing effects of Apple’s focus on protecting iPhone users’ privacy continue to affect Facebook’s user tracking systems. It is also troubling that the big push the company is making to build metaverse Never generate a reward.
In addition to layoffs, Meta confirmed its fourth-quarter revenue forecast of 30,000 million to $32.5 billion. The group emphasized that the 2022 expenditure outlook has already taken into account the recently announced cuts and It remained unchanged at $85 billion to $87 billion.
But the company said that too He now sees costs for 2023 from $94,000 to $100,000 millionCompared to previous forecasts of 96 thousand million to 101 thousand million dollars. This reflects reduced staffing plans for the coming year. That equates to a cut of $1.5 billion, based on the midpoints of those ranges. Meta also confirmed that it expects operating losses in Reality Labsthe business sector which includes headphones VR and metaversegrowing significantly in 2023, as of 2022.
Celebrating the experts
Analysts, especially those who were bullish on the Meta stock, responded with the news with relief. “Meta and Zuckerberg loudly heard the massive negative reaction From investors to the notable lack of cost control during the third quarter results…and they have changed,” he wrote. Mark Mahanian analyst at Evercore ISI, in a research note.
“It is clear to us that a lack of cost discipline is by far the number one issue affecting Meta stocks…and we believe today’s news addresses this concern squarely,” he adds. for this part, Brad Ericsonanalyzer RBC Capital, Estimated that lower operating expenses related to job cuts could boost 2023 earnings by 45 cents per share, While lower capital expenditures can add another 5 to 7 cents per share.
“While this announcement does nothing to alleviate concerns about competition and Visualize excessive investment in the metaverse, andIt is the first sign that the CEO has shown a willingness to accept the wishes of shareholders To invest a little more quietly, given the various headwinds the business is facing,” said Erickson.
also, Doug Anmouthanalyzer JP Morganwhich remains neutral about the publicly traded company, wrote that while it expects to see further declines in its spending forecast for 2023, “The overall decrease in the labor force is likely to be larger More than most people expected and it shows that the management team works with greater discipline.”