Zuckerberg Emulating How Tim Cook Runs Apple? Why Meta Analyst Sees Short-Term Strength

Zinger Key Points
  • After Snap's continued outperformance, investors were skittish ahead of Meta's quarterly results.
  • Meta, however, chose to play in line with the environment and hinted at financial disciple and a shift in focus to its core business.

Meta Platforms Inc. META shares soared 20% late Wednesday after the Mark Zuckerberg-led company reported a revenue beat and issued in-line revenue guidance for the first quarter.

Focus Back On Core Products: Meta’s founder CEO Zuckerberg has shifted focus to core products like Reels and Messenger, said Deepwater Asset Management co-founder Gene Munster. Reality Labs and AI will now have enough capital to grow but not enough to be reckless with profit margins, he added. The fund manager appreciated Zuckerberg for acting on what investors wanted.

“Dare I say he may have picked up some pointers watching how Tim Cook runs Apple,” Munster said.

KeyBanc Sees Near-Term Strength In Stock: Positive revisions around expense cuts and Zuckerberg’s renewed focus on efficiency will lead to near-term strength in Meta stocks, KeyBanc analyst Justin Patterson said.

The analyst noted that fourth-quarter revenue of $32.2 billion exceeded the consensus and KeyBanc’s estimates, and earnings per share of $1.76 trailed expectations.

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Daily active user count of 2 billion bettered the consensus of 1.98 billion, he said. The increase in the metric and the ramp-up of Reels likely suggest capex is skewing toward “Family of Apps,” while Reality Labs is a multi-year journey, he added.

Among the encouraging takeaways from Meta’s earnings report and the management commentary is the “meaningfully” lowered operating and capital expenditures, reflecting a more cost-efficient data center architecture for AI and non-AI workloads, Patterson said. He also noted that the management signaled some moderation in capital intensity in future periods.

Citing expectations for a higher user base, modestly better average revenue per user and expense reductions, Patterson raised his 2023 and 2024 revenue estimates for Meta by 1% each and EPS estimates by 16% and 13%, respectively.

While encouraged by the financial discipline, the analyst said he is cautious of challenges to return to a mid-teens annual growth profile. These challenges include time spent, privacy and the regulatory environment.

The analyst said that Zuckerberg’s commentary suggests a meaningful change in Meta’s culture with fewer layers of management and this will likely allow faster decision timed and reduced opex. He, however, said swift changes can risk disrupting morale.

KeyBanc maintained a Sector Weight rating on Meta Shares.

Price Action: Meta shares, which closed Wednesday's regular trading up 2.79% at $153.12, climbed 20.16%, to $183.99, according to Benzinga Pro data.

Read Next: Meta Needs To Slash Another 7.5K Jobs To Accommodate Metaverse Ambitions, Analyst Says

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Posted In: Analyst ColorEarningsNewsSocial MediaGuidanceReiterationAnalyst RatingsTechGeneralDeepwater Asset ManagementGene MunsterInstagram ReelsJustin PattersonKeyBanc Capital MarketsMark Zuckerberg
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