Two reasons why Meta stock is up 20% after a massive earnings miss
This earnings season, the last thing investors have rewarded is a bottom-line miss vs. expectations of any magnitude. Unless you are Meta (META).
Following a massive earnings shortfall, shares of the social media behemoth soared nearly 20% in pre-market trading on Thursday.
Here’s how Meta fared in comparison to Wall Street estimates — at first glance, it was far from rosy and deserving of a significant increase in the company’s market cap.
- Q4 Revenue – $32.17 billion actual versus $31.65 billion expected
- Advertising Revenue – $31.25 billion actual versus $30.86 billion expected
- Adjusted Earnings Per Share (EPS) – $1.76 actual versus $2.26 expected
- Facebook Daily Active Users (DAUs) – 2 billion actual versus 1.98 billion expected
- Family of Apps Daily Active Users (DAUs) – 2.96 billion actual versus 2.92 billion expected
- Reality Labs Operating Loss – -$4.28 billion actual versus -$3.99 billion expected
In November of last year, Meta laid off 11,000 employees (13% of its workforce) in response to pressure from large investors to improve margins. Some of the layoffs are as severe as canning cafeteria workers (see the tweet below). To the delight of the Meta bulls, CEO Mark Zuckerberg has stated that the company is only beginning its cost-cutting journey.
While cost-cutting boosted Meta’s profits, a significant increase in the company’s stock buyback could provide an additional boost. Stock buybacks reduce the number of shares outstanding, which helps to increase earnings per share.
