Battered by Apple’s new privacy settings that hampered its key online ad business, and investor scorn at Mark Zuckerberg’s pivot to the untested realm of the Metaverse, Meta Platforms (NASDAQ:META) appeared down and out. By November, the Meta share price shod roughly 60% of its value from its August 2021 peak.
With rivals like TikTok in the ascendancy, and the Metaverse someway off, Meta’s empire looked to be the first casualty of Big Tech’s crisis period.
However, Meta has begun to claw back ground, and the outlook no longer appears so desolate. It has posted earnings reports and engagement figures that have exceeded the expectations of analysts, boosting the share price by 23% over just two days. Indeed, its share price has risen by 32% over the past month. That Snap reported dismal figures a day prior did much to contextualise Meta’s success. So, what is this recovery attributed to?
Firstly, spiralling costs are being reined in. Zuckerberg promised that the company would be more proactive about cutting underperforming, or necessary projects. That he walks the walk is evident from the 13,000 workers culled from the firm.
The CEO is calling 2023 “The year of efficiency”. This sentiment is catnip to investors who have often perceived Meta’s hallowed “Metaverse” as a white elephant.
More immediately, the company announced that it would buy back an additional $40bn worth of shares. Just hours later, the state of California threw out a case blocking Meta’s acquisition of Within, a popular virtual-reality fitness app. Both swelled the Meta share price.
With new hardware in the offing, reduced operating costs and platforms like Instagram and WhatsApp managing to hold firm against the onslaught of TikTok, is Meta over the worst? I am inclined to say yes. This turnaround is no flash in the pan: Alphabet and Microsoft are all recovering from equally sharp slumps. As the economy stabilises, and cost discipline has returned, momentum is back with big tech.
This is certainly true with regards to AI, the latest technology to capture the world’s imagination. Research and development for this is led by private firms. And with colossal investment and success in masterminding the Instagram Reels algorithm, Meta is well positioned to make a breakthrough on this frontier. Progress on this front has the potential to reignite the hype around the industry that pushed share prices to dizzying heights throughout 2020-21.
While Meta remains vulnerable to regulatory issues, these could equally be a blessing in disguise. While privacy and antitrust rulings could clobber the company, moves to ban TikTok — a prospect increasingly mooted in the USA — would make Instagram Reels the West’s next best thing.
Overall, the more favourable economic conditions, Zuckerberg’s renewed commitment to shareholder interests and healthy balance sheets suggest to me that the best is still to potentially come for Meta’s share price. I’m adding the stock to my watch list accordingly.
