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June 24, 2024

Meta Shares Skyrocket As Company Announces First-Ever Dividend Alongside Record Profits

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Feb 6, 2024

Meta Platforms, the parent company of Facebook, Instagram and WhatsApp, announced its first-ever quarterly dividend payment on February 1st 2023, alongside strong fourth quarter earnings results that beat analyst expectations. The news sent Meta’s stock price soaring over 20% in after-hours trading, adding around $200 billion to the company’s market valuation and marking the largest single-day increase in market capitalization of any company in stock market history.

Meta Stock Price Hits 14-Month High As Investors Welcome Efficiency Gains and New Dividend

The company’s shares hit a 14-month high on February 2nd, closing up 23.3% for the day at $188.77. This adds up to a staggering $236 billion increase in Meta’s market valuation since the start of 2023.

Meta’s strong stock rally comes on the back of its Q4 2022 earnings release, which revealed increased revenue and profits alongside major cost-cutting initiatives over the past year. The company earned $32.17 billion in revenue, beating analyst estimates, alongside record profits of $4.65 per share.

The earnings release also formally announced Meta’s plans to pay a quarterly dividend of $0.78 per share starting in Q2 2023. This unexpected dividend, alongside Meta’s first-ever year-over-year reduction in expenses, signaled to investors that the company’s push for improved efficiency over the past year is paying off.

Metric Q4 2022 Change Year-Over-Year
Revenue $32.17 billion 4%
Earnings Per Share $3.00 22%
Expenses $25.78 billion 2% decrease
Monthly Active Users 2.96 billion 5.6% increase

Zuckerberg Attributes Turnaround to Increased Efficiency and AI Progress

In the Q4 2022 earnings call, Meta founder and CEO Mark Zuckerberg credited the company’s strong performance in part to significant reductions in operating costs over the past year. After its stock plunge and several quarters of disappointing earnings in 2022, Meta embarked on major cost-cutting efforts, including hiring freezes and layoffs of 11,000 employees.

The resulting decrease in expenses this quarter – the first year-over-year reduction for Meta in its 18-year history as a public company – indicates that the efficiency push paid off.

“We’re focused on becoming a stronger company,” said Zuckerberg. He described Meta as “a streamlined, high-performing operation” that would continue minimizing cost increases going forward, keeping expenses similar to 2022’s total this year.

Zuckerberg also highlighted Meta’s progress in AI as a key reason for optimism about the company’s future growth prospects. He announced that Meta’s new AI discovery engine BlenderBot 3 is now ready for public beta testing, touting it as “state of the art in conversational AI.” BlenderBot 3 notably incorporates learnings from Meta’s previous AI stumbles in 2022, leading Zuckerberg to promise it will enable “smarter, more natural conversations.”

Early reception to BlenderBot 3 suggests Meta may have succeeded in developing an impressively advanced conversational AI. Though time will tell whether it can match excitement levels around competitive offerings like Bing AI from Microsoft, its release schedules well with Meta’s big AI event in March. Meta plans to showcase more innovations at its inaugural AI Summit on March 23rd, aiming to highlight progress on key strategic initiatives vital to its growth.

Dividend and Improved Cost Efficiency Attract Investor Interest

Though Meta faces ongoing revenue challenges, the dividend announcement and expense reduction achievements drastically changed investor sentiment. ING analysts upgraded Meta stock to a “buy” rating, applauding its “outstanding cost control and capital returns.”

Other analysts also cited the rare cost-cutting success and dividend catalysts as reasons for investors to give Meta another look. Atlantic Equities upgraded its rating to “overweight,” expressing confidence Meta can deliver continued growth at lower costs than previously expected.

After prioritizing long-term metaverse investments over short-term profitability in 2021 and 2022 – hurting shareholder returns and its stock price – Meta now intends to return excess cash to investors. The quarterly dividend offers investors tangible returns today, even if metaverse bets take longer to pay off.

Metaverse Ambitions Remain Despite Near-Term Focus on Efficiency

Despiteplans for financial prudence near-term, Zuckerberg affirmed Meta’s commitment to its future metaverse vision on the earnings call:

“While we face near-term challenges on revenue, the megatrends we’re betting on are going to be massive. I think delivering the next computing platform will unlock hundreds of billions of dollars, if not trillions over time.”

Meta invested over $13 billion in its Reality Labs division building metaverse and VR hardware products in 2022. It does not expect to reduce this investment level in 2023. However, Reality Labs operating losses dropped over 20% year-over-year to $4.3 billion this quarter – suggesting modest progress towards profitability.

While Meta’s quarterly earnings focused on its resurgent digital advertising business, executives made clear thatambitious metaverse plans remain central to its long-term strategy. The efficiency drive over the past year appears to have freed up resources to continue investing in the future today – without waiting years for metaverse products to become profitable.

Increased Engagement and Advertising Spend Drive Rebound in User Growth

Meta also saw a return to strong user growth in Q4 after its first ever sequential decline last quarter. Monthly active users on Meta’s family of apps – includingFacebook, Instagram and WhatsApp – reached 2.96 billion, up from 2.93 billion last quarter and 2.8 billion at the end of 2021.

Much of this re-acceleration comes from increased engagement and user sessions in Reels, Meta’s TikTok competitor. Total daily time spent watching Reels has doubled year-over-year to exceed 230 billion minutes per day. Reels sessions per day are also up 35% since September. As the viral short-video product continues rapidly expanding, revenue and users are rising accordingly.

Steady user growth suggests that Meta’s cost savings over the past year have not noticeably impacted product quality or output. Zuckerberg noted that headcount reductions occurred primarily in recruiting and business roles, limiting their effect on engineers and product managers building consumer offerings. Confidence that Meta’s competitive standing remains strong likely further buoyed investor sentiment.

On the advertising side, Meta has also seen increasing demand over recent months as businesses ramp up their marketing budgets again. Impression and pricing growth accelerated vs. Q3 2022, especially among app advertisers looking to scale user acquisition efforts. With advertising still comprising over 97% of its revenue, Meta’s fortunes remain highly sensitive to the overall digital ad market’s strength. Recent tailwinds thus further fueled momentum behind its stock turnaround.

Stock Surge Adds $28 Billion to Zuckerberg’s Net Worth

Meta CEO Mark Zuckerberg has added over $28 billion to his personal net worth in just two days as a result of the company’s tremendous stock rally.

Regaining over half of the wealth he lost in 2022, Zuckerberg is now worth around $79 billion according to Bloomberg’s Billionaire Index – placing him back amongst the top 10 richest people worldwide. The $236 billion market cap increase also means Meta once again ranks comfortably within the 10 largest publicly traded companies globally after falling outside last year.

Zuckerberg directly owns over 350 million shares in Meta Platforms, equating to 13% of the company’s total. His net worth fluctuates drastically alongside its stock price as a result – falling by over $70 billion in 2022 amidst Meta’s decline.

Meta also announced that Zuckerberg will receive $705,000 annually in dividend income beginning in Q2 2023 given his sizable stock holdings. Other major individual shareholders similarly stand to earn substantial passive returns through Meta’s newly-introduced dividends.

What Comes Next? Sustaining Growth and Progressing Metaverse Plans

With Meta seemingly turning a corner after a volatile 2022, attention now turns to whether its reinvention as a “leaner, meaner growth machine” can continue. Impressive Q4 results marked an excellent start to its drive toward improved efficiency, but investors want evidence that strong performance and cost discipline can be sustained.

Meta must now demonstrate that its rebound last quarter was not a one-off phenomenon. Continued user growth, declining costs, increased metaverse investment and future dividends could make its stock breakout much more than a short squeeze. Executing across all these fronts in 2023 and beyond would support Zuckerberg’s case that temporary setbacks haven’t significantly hampered Meta’s long-term growth outlook.

However, skepticism persists on multiple fronts. Meta appears to once again be reliant on digital advertising demand holding up amidst a potential economic slowdown. Its big bets on loss-making metaverse projects also look likely to drag earnings for years before becoming meaningfully profitable. With both tailwinds and lingering concerns, it remains unclear whether Meta is truly a resurgent Phoenix – or just a falling knife bound for renewed declines.

Upcoming quarterly earnings reports, product announcements like the AI Summit and real-world performance of investments like Reality Labs this year will provide greater evidence one way or the other. For now the momentum lies back with Meta after its annus horribilis in 2022…but it finds itself at a crucial inflection point entering 2023.

Sustained efficiency improvements, responsible investment balancing short and long-term shareholder value creation and graceful execution amidst uncertainty now determine whether Meta’s Darkest Days are behind it – or still ahead.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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