Meta Platforms (META) shares soared higher Thursday, after the social media group unveiled plans for a $40 billion stock buyback and forecast better-than-expected current quarter revenues despite a broader global slowdown in ad spending.
The stock, in fact, is on pace for its best single-day gain in more than a decade, lifting it back about the $500 billion market cap threshold for the first time since last July.
Meta, the parent company of Facebook, Instagram and WhatsApp, posted softer-than-expected fourth quarter earnings of $1.76 per share, well shy of the Street's $2.22 forecast, thanks in part to a $4.2 billion charge linked to last year's massive layoffs and office closures.
Meta edged past analysts' revenue estimates with a $32.17 billion tally -- around 97.2% of which came from advertising sales -- and while that figure is set to fall to between $26 billion and $28.5 billion this quarter, it was just in front of the Refinitiv estimate of $27.1 billion.
Daily active users across the family of apps were up 4% from last year to around 2 billion in December, Meta said, as it continues to ramp its short-form video offering, 'Reels'. Monthly active users were up 2% to around 2.96 billion.
The $40 billion buyback, however, is what mostly moved the stock, with help from Meta's pledged to lower operating expenses by around $6.5 billion -- still expected at between $89 billion and $95 billion -- amid what CEO Mark Zuckerberg called a 'year of efficiency'.
Capital spending, as well, is expected to fall $4.5 billion from last year to between $30 billion and $33 billion as Meta looks to redesign some of its data centers to become more efficient as Zuckerberg transitions from a company leader focused on growth -- at times at any cost -- to one seeking to instill cost discipline and maturity across the whole of its business.
"We closed last year with some difficult layoffs and restructuring some teams. And when we did this, I said clearly that this was the beginning of our focus on efficiency and not the end," CEO Mark Zuckerberg told investors on a conference call late Wednesday.
"I think that there is going to be some more that we can do to improve our productivity, speed and cost structure. And by working on this over a sustained period, I think we will both build a stronger technology company and become more profitable," he added.
Meta shares were marked 28.2% higher in Thursday afternoon trading to change hands at $196.30 each, extending the stock's year-to-date gain to around 57.5%.
Zuckerberg's focus on cost-cutting -- and his multiple references to 'efficiency' in last night's earnings call, earned Meta host of Wall Street upgrades, with Bank of America lifting its rating to 'buy' from 'neutral', with a $60 boost to its new $220 price target.
Morgan Stanley was also impressed, lifting its price target by $60, to $190 per share while keeping its 'equal weight' rating in place.
"As Meta shows increased discipline while it has multiple near-term catalysts in Reels monetization ramping, messaging ads further scaling, and AI improving targeting and measurement, we expect growth rates to improve through 2023, helping to grow profitability and free cash flow," said JMP Securities analyst Andrew Boone, who carries a 'market outperform' rating with an improved $210 price target on the stock.
"This as we believe competition from TikTok has lessened (at least for user time) and engagement across Meta remains healthy," he added.
