META

Why Meta Platforms Jumped 23.8% in January

What happened

Shares of Meta Platforms (NASDAQ: META) jumped 23.8% in January, according to data provided by S&P Global Market Intelligence. The social media company has been in the limelight since joining a slew of big tech companies in announcing widespread layoffs amounting to 13% of its workforce back in November.

Person browsing social media on mobile smartphone.

Image source: Getty Images.

So what

There were several reasons for investors to feel more optimistic last month. First, they believed Meta is working on a leaner cost base after shedding more than 11,000 employees in the previous quarter. CEO Mark Zuckerberg sounded contrite and acknowledged that the company had hired too aggressively and was now facing a combination of declining e-commerce demand, a potential economic slowdown, and stiffer competition. This admission gave investors confidence that management was aware of these challenges and taking concrete action to set things right.

Another positive sign came in the form of inflation, where consumer prices dipped by 0.1% in December. This decline was the largest month-over-month decrease since April 2020 and hinted that the Federal Reserve's massive interest rate hikes in the middle of last year were effective.

Expectations were for a tapering of further hikes, and the central bank ended up raising interest rates by just a quarter of a percentage point in early February, dialing down from half of a percentage point in December. The feel-good sentiment led to a rally in growth stocks as investors believed the rate-hike cycle could be coming to an end and that interest rates might even start to decline soon if the economy sputtered.

Now what

Meta Platforms released its fourth-quarter and full-year 2022 earnings in early February. Its numbers blew past expectations, and the company announced a massive $40 billion share buyback as well. Revenue came in at $32.2 billion, higher than the $31.5 billion analysts estimated. Zuckerberg also touted the progress made by Meta Platforms with its Reels product and its artificial intelligence discovery engine, while daily active users hit a new milestone of two billion, up 4% year over year.

However, the fourth quarter also saw restructuring charges for its Family of Apps and Reality Labs totaling $4.2 billion, thus making it tough to compare its net income against analyst estimates. Meta Platforms has dubbed 2023 the "Year of Efficiency" as it sets the tone for becoming a leaner organization that can continue to monetize its suite of social media apps. It's still early, but investors should keep their faith in the company as it seeks to turn its fortunes around in the coming quarters.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Royston Yang has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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