Business

Meta-morphosis: Share rebound at Facebook parent brings good times for investors

Things have changed for the better since Zuckerberg’s apology to staff for cuts last year

Meta announced it would begin paying quarterly dividends and unveiled plans for a $50 billion share buyback. Photograph: Getty

Ciara O'Brien
Fri Feb 2 2024 - 15:59

If you are a Meta shareholder who has been holding out for better days, congratulations. The company’s shares have rebounded strongly since a post-pandemic crash that kicked off a round of cost-cutting, leading to thousands of job losses.

Back then, chief executive Mark Zuckerberg took the blame for the coming cuts, saying he had counted on the pandemic boom in online commerce continuing. “I got this wrong, and I take responsibility for that,” he told staff.

On Thursday, there was a more positive picture. Meta reported strong ad sales and rebounding user growth in the fourth quarter of the year. Revenue for the current quarter is also predicted to beat analyst estimates, providing a further boost to the stock.

The social network also announced it would begin paying quarterly dividends and unveiled plans for a $50 billion share buyback.

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The company said on Thursday it would pay 50 cents per share in a quarterly dividend, rewarding shareholders who had hung on to stock through some turbulent years.

“The returning of cash to shareholders is a bold and well-regarded move. The amount of free cash pumping through the business means it is more than able to afford it, and it helps pay investors for their patience,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said.

Early on Friday, the impact of that news could be clearly seen in the stock market. Meta’s shares soared 17 per cent in premarket trading.

It marks a turnaround for the Facebook and Instagram owner, which cut staff numbers by more than 20 per cent last year as it embarked on a “Year of Efficiency” in an attempt to get the business back on track.

“The ‘Year of Efficiency’ has paid off, with both headcount and costs dropping, and Meta exceeding our expectations for full-year 2023 ad revenue,” Jasmine Enberg, principal analyst at Insider Intelligence, said.

That will also mean a significant payout for chief executive Mark Zuckerberg, who owns about 350 million Meta class A and class B shares.

But analysts, while positive on the recent announcements, were also cautious about future prospects.

“Meta still faces the big task of proving that it can integrate AI with its other big bet, the metaverse,” Enberg said. “Meanwhile, a pullback from Chinese advertisers could be a headwind to its ad business, and investors won’t be willing to overlook the mounting losses in Reality Labs should Meta’s ad business falter.”

[ Keith Duggan: Mark Zuckerberg’s apology was dramatic, but that alone won’t make children any safer online ]

It was a tale of two tech companies though, with Apple shares declining as investors zeroed in on waning demand for its products in China.

While the iPhone maker reported better than expected revenue of $119.6 billion (€109.96 billion) for the quarter to the end of December, breaking four consecutive quarters of declining revenue, iPhone sales that rose 6 per cent to $69.7 billion, and a record services revenue of $23.1 billion, attention was on slower sales in China.

The company is facing increased competition from Huawei in the market, while also dealing with potential restrictions on the use of its products in some government agencies, a hangover from geopolitical tensions with Washington.

“Factors to consider are waning iPhone demand in China as well as slowing of iPad and Mac unit sales, which are reflective of the continued downturn in the PC industry,” said Insider Intelligence senior analyst Gadjo Sevilla.

“Continued expansion in [services] is expected to bring in more profit in 2024. The halting of Apple Watch Series 9 and Ultra 2 model sales over the holidays due to an ongoing patent dispute likely factored into quarterly results.”

Apple also launched its Vision Pro mixed reality headset in recent days, but analysts said it could be some time before that factors into company earnings due to supply constraints and the high cost of the product.

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist

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