Add to Watchlist: VERSES AI, Ticker VERS
The Meta Turnaround
The catalyst for Meta’s recent rally is likely traced to both extensive cost-cutting measures and adjusting to the negative effects of Apple’s privacy changes which significantly hurt ad revenue. The company announced further layoffs last month and pledged to be more efficient, adding kindling to the rally. These cost-cutting measures have been bolder than at peers such as Alphabet Inc, making Meta the most durable megacap if consumer spending weakens.
Meta Current Performance in the Market
While some investors may be unwilling to pay up now for Meta after the blistering rally since November, Meta’s shares are still much cheaper than its big tech peers and the Nasdaq 100 Index. Trading at 17 times forward earnings, Meta is below its historical 10-year average of 26 times. In contrast, Amazon.com Inc. trades at 36 times, Microsoft Corp.’s price-earnings ratio is 28, Apple is at 26, and the tech-heavy gauge sells for 24 times.
The concern about inflation and a potential recession has squeezed ad budgets at businesses, crimping the primary revenue stream for companies like Meta, Google parent Alphabet, and Snap Inc. However, some analysts are seeing more stability in overall advertising demand. With trends stabilizing, Meta’s sales are set to rise by 4.7% this year, with growth more than doubling to about 11% in 2024.
While that’s a much slower cadence than investors are used to, Meta under Chief Executive Officer Mark Zuckerberg has managed to resume growing. In many respects, what Mark Zuckerberg has done in the last couple of months is: begin to look at running the company like a regular company as opposed to a tech company with top-line growth that can cover a lot of mistakes because they really didn’t have that anymore.