As Meta Platforms’ (NASDAQ:META) “year of efficiency” draws to a close, the technology company and its stock look stronger than ever. META stock has gained 154% on the year, making it a top performer among technology stocks and a big contributor to the Nasdaq index’s 36% increase in 2023.
The strong run over the past year represents a significant turnaround for Meta Platforms, which saw its stock fall 53% during the 2022 bear market and had analysts and investors questioning its plans to build a virtual world known as “the metaverse.” Now, as 2024 approaches, the company and its shareholders look well-positioned for continued growth.
META Stock and the Year of Efficiency
Meta Platforms began 2023 by announcing its plans to undertake a year of efficiency. The company had to cut metaverse spending and focus on AI projects. Better-managing costs also required Meta to layoff thousands of workers as the Facebook-parent company responded to Wall Street’s concerns about its spending and strategic direction.
The job cuts saw Meta reduce its headcount by over 15% globally. The company also lowered its total expenses in 2023 to $89 billion from a planned $100 billion and announced that its board of directors authorized a $40 billion increase to its stock buyback plan.
In 2022, the company bought back $27.9 billion of its own stock. Meta’s expenses increased by 22% to $25.8 billion in 2022, causing concern on Wall Street.
The reduced spending, staff reductions, and focus on shareholder returns were exactly what analysts and investors wanted from Meta Platforms and its stock has been steadily rising this year as a result.
AI Leadership and Products
Another big move by Meta Platforms this year that has won over investors and analysts was the company’s decision to refocus its efforts on AI and jump into the technology with both feet.
The company has done just that, announcing earlier this fall a new virtual reality headset that employs AI, as well as several AI applications at its most recent developer conference. Specifically, Meta unveiled several generative AI chatbots that look intriguing.
Meta’s “Emu” text-to-image platform will be integrated into its Messenger app, along with AI photo editing tools for Instagram.
Plus, Meta has said that it plans to make its own custom-made microchips to power its AI and video-processing platforms, and it has joined forces with IBM (NYSE:IBM) to launch a group of more than 50 other companies, research groups, and academics called the “AI Alliance” that will focus on advancing responsible AI projects.
The aggressive pivot to AI has caught the attention of investors and analysts who see Meta Platforms as a major player in the space and likely to benefit from AI’s advances in coming years.
Growth and Issues
All the changes undertaken this year are paying off for META stock. The company has issued a string of solid financial results throughout the year, and its recent third-quarter print was no exception.
Meta reported a 23% increase in its Q3 revenue as the market for online advertising at its social media sites rebounds following the pandemic. In fact, revenue in Q3 grew at the fastest rate in two years, boosting META stock. Earnings per share of $4.39 trounced the $3.63 that was expected on Wall Street.
Despite the strong results, Meta is not without problems. Much was made of the recent news that Meta CEO Mark Zuckerberg sold $190 million of META stock in November of this year, his first sale of company stock in two years.
Also, the company is grappling with a lawsuit brought against it by 41 U.S. states whose attorney general’s accuse the company of intentionally addicting children to its social media platforms that include Instagram and knowingly hiding the harms that can be found online.
While not insignificant, the lawsuit will be resolved in time and is not likely to pose any near-term risks to Meta’s business or performance. As for the stock sale, almost all executives sell some of the equity they hold in a company from time-to-time. These sales are often scheduled far in advance and are not an indication of trouble or a lack of faith in a firm they manage.
META Stocks Is A Buy
As 2023 comes to an end, Meta Platforms looks to have righted its ship and positioned its business for future success. The company has reduced costs, become a major player in the red hot arena of AI, and continues to post impressive growth across its varied businesses. While it faces some headwinds, they don’t look like anything that is insurmountable and they shouldn’t stop the company’s long-term growth trajectory. Heading into 2024, META stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
