Feb 2 (Reuters) – Meta Platforms Inc ( META.O ) shares closed nearly 23% higher on Thursday, helping a rally in the tech sector after the Facebook owner floored Wall Street by cutting its spending forecast and ramping up its stock buyback plan. $40 billion.
The company added more than $90 billion to its market value and the stock logged its best day in a decade. The surge also lifted shares of Amazon.com ( AMZN.O ), Apple ( AAPL.O ) and Alphabet ( GOOGL.O ), all of which sport valuations of more than $1 trillion and will report earnings after the market close.
Meta’s move to rein in costs marks a dramatic shift for a company that has spent billions of dollars to make its vision of a future metaverse a reality, even as its core business faces stiff competition and a weak advertising market.
At least 24 analysts raised their price targets on the stock after the results, with many saying a combination of lower costs, expected revenue growth and share buybacks will boost Met’s earnings per share.
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“This is rare,” analysts at Evercorse ISI said, noting the positive development. “And stocks rarely react.”
Wednesday’s results also provided some relief to markets after an earnings miss at Snap Inc ( SNAP.N ) sent tech shares lower on Tuesday.
“After Snap’s debacle, the fact that the meta wasn’t so bad has boosted tech mega-caps,” said CitiIndex analyst Fiona Cincotta.
“There is also a less hawkish Fed (Federal Reserve), which is generally boosting growth and demand for technology stocks.”
“Years of Skill”
Meta now expects its 2023 spending to be between $89 billion and $95 billion, a sharp decline from its previous estimate of $94 billion to $100 billion, with CEO Mark Zuckerberg calling the period “a year of efficiency.”
The forecast reflects savings from 11,000 job cuts announced in November, plans to lower data-center construction spending and moves to eliminate non-critical projects.
“Promising that 2023 will be a year of performance is always going to go down well with investors concerned about the broader issue of spending leading to the unproven potential of the metaverse,” said Russ Mold, investment director at AJ Bell.
There were also signs that Meta’s core social-media business is getting back on track, with monetization functionality for short-form video reels on Facebook doubling and the business on track to break-even by the end of 2023.
The company, which forecast first-quarter revenue above market estimates, also said Facebook’s daily active users rose to 2 billion from 1.98 billion in the previous quarter.
“Meta is getting its mojo back,” Baird analysts said.
Reporting by Medha Singh and Aditya Soni Editing by Vinay Dwivedi
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