Meta shares pop 5% as Wall Street rallies around layoffs
Mark Zuckerberg, chief executive officer of Meta Platforms Inc., speaks during the virtual Meta Connect event in New York, US, on Tuesday, Oct. 11, 2022. for a virtual future.
Michael Nagle | Bloomberg | Getty Images
Shares of Meta closed up 5% Wednesday after the company announced it will lay off more than 11,000 employees.
Analysts at UBS were encouraged by Meta’s announcement Wednesday and said they believe the layoffs are a clear sign that the company “gets it.” The analysts reiterated their buy rating on Meta shares and said they liked Zuckerberg’s comment about becoming “more capital efficient” in his employee memo.
“We think Meta cost reductions – across opex and capex – signals that the company hears investors, and we think the shares can move higher,” they wrote in a Wednesday note.
Investors have been concerned about Meta’s rising costs and expenses, which jumped 19% year over year in the third quarter to $22.1 billion. The company provided lukewarm guidance in late October for its upcoming fourth-quarter earnings which spooked investors and caused its shares to sink nearly 20%.
Meta’s stock has lost more than 71% of its value so far this year and the company became the worst performer in the S&P 500 last week.
RBC Capital Markets analysts said the layoffs do not remedy the many challenges that Meta is facing, but that the “management’s first olive branch is at least a start.”
They maintained their outperform rating on Meta.
“While this announcement does nothing to alleviate the concerns around competition, signal loss and the perception of excessive Metaverse investment – it is the first sign the CEO has shown of being willing to acquiesce to shareholders’ desire for investing a bit more judiciously given the various headwinds the business faces,” the RBC analysts wrote in a note Wednesday.
Analysts at JPMorgan said they viewed Meta’s headcount reductions favorably and that the layoffs could theoretically remove around $8 billion of costs for the company on an annual basis.
“While we had hoped the 2023 expense outlook would come down more, the workforce reduction overall is likely bigger than most people had expected and shows management is operating with increased discipline, especially after a tough almost 2 week period since reporting 3Q earnings.”
–CNBC’s Michael Bloom and Jonathan Vanian contributed to this report.