Meta's pivot from 'irresponsible' metaverse spending earns stock an upgrade
By Emily Bary
Edward Jones analyst was previously worried about profligate spending on the metaverse but is now 'encouraged' by cost cuts
Meta Platforms Inc.'s stock recently secured an upgrade from a Wall Street analyst who applauded the company's increased discipline.
Edward Jones analyst David Heger upgraded Meta shares (META) to buy from hold late Friday, writing of his increased optimism in the company's earnings outlook due to expense reductions and the prospect for a stabilization in advertising revenue this year.
His upgrade comes after Meta announced last week that it planned to cut about 10,000 more jobs, building on the 11,000-plus layoffs disclosed last fall.
Read: Meta to cut 10,000 more jobs in latest round of layoffs for Facebook parent
"We had been concerned about the planned increase in expenses in 2023, much of which was earmarked for the company's metaverse initiative," he wrote. "We feltthat management was being irresponsible considering the weakened environment for ad spending."
More recently, however, the Facebook parent company has "announced efforts to reduce expenses, focus on efficiency and improve profitability," Heger noted. The company "has pulled back on its metaverse investment."
He added that he's "encouraged to see Meta reduce its cost structure to improve earnings during the uncertain macroeconomic environment."
See also:Meta contrasts with 'slow and lethargic pace' of its rivals as it cuts more jobs
Facebook parent Meta remains the "leader in social media" despite competitive challenges, Heger said, and the company's vast user base of 3.7 billion across its products should help it continue to provide useful analytics to marketers.
While the company faces pressure from antitrust regulators, Heger doesn't see a near-term threat from these developments. "We expect that these challenges will take years to resolve and do not impact user engagement or advertiser interest," he wrote.
Shares of Meta are up 1.3% in Monday morning trading. The stock has gained about 65% so far this year as the S&P 500 has risen 2%.
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March 20, 2023 09:50 ET (13:50 GMT)
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