Meta may be slowing winning back Wall Street’s confidence as it looks to keep costs from spiraling amid a slow-down in ad spending and deeper losses in its metaverse project.
JPMorgan analyst Doug Anmuth lifted his rating on the group to ‘overweight’, from ‘neutral’, while boosting his price target by $35 to $115 per share, citing better cost discipline at the social media and augmented reality group and easing pressures from Apple’s (AAPL) – Get Free Report privacy rules, known as App Tracking Transparency (ATT), have made it difficult for Facebook and Instagram to measure the success of some of ad campaigns, resulting in delayed or restricted data.
“Heading into 2023, we believe some of these top and bottom line pressures will ease, and most importantly, Meta is showing encouraging signs of increasing cost discipline, we believe with more to come,” Anmuth said.
Last month, Meta unveiled plans to lay off around 11,000 people, or 12.5% of its global workforce, in the first major round of job cuts under CEO Mark Zuckerberg.
Meta CFO Dave Wehner told investors on October 26 that the group expects hiring to slow “dramatically” in the coming months, but said that the group’s overall headcount — pegged at 87,000 — would remain “roughly flat next year relative to current levels … with new hiring investment only in our highest priorities.”
The move came just weeks after it confirmed plans to “meaningfully” ramp-up investments in Reality Labs, the division that will house the company’s metaverse plans and has absorbed more than $9.4 billion in losses over the first nine months of the year, as the social media group continues to transition from its Facebook roots.
The choice to double-down on the expensive enterprise, which will add at least another $4 billion to next year’s capital spending plans – now pegged at between $30 billion to $34 billion for the coming year.
Meta shares were marked 2.11% higher in pre-market trading to indicate an opening bell price of $118.60 each, a move that would still leave the stock nursing a 65% year-to-date decline.