- Benchmark analyst Mark Zgutowicz remained Hold-rated on Meta Platforms Inc META before Meta's 4Q report.
- The analyst did not see enough '23 opex leverage to spark the stock price in a weak ad spend environment and lingering ROAS impact from Apple Inc AAPL ATT.
- With management determined to expand Reality Labs' operating losses "significantly" in '23, core ad-related (net) headcount cuts must continue to mount, adding long-tail pressure to ad revenue.
- The analyst assumed '22E ending headcount of ~76.6k (down from ~84.6k estimated to peak in early November '22).
- The analyst believed the company needs to cut at least another ~7500 heads in '23E to accommodate a no-growth revenue environment.
- The analyst estimated flat '23 revenue Y/Y vs. consensus' +5% and '22E -2% Y/Y.
- Under these and his -350 bps Y/Y total expense margin assumptions, the analyst projected '23E revenue per average employee growth of +6% Y/Y, tracking below +11% opex per average employee Y/Y.
- The assumptions paralleled the analyst's '23E total revenue/GAAP expense growth Y/Y of flat/+5% vs. consensus +5%/+10% Y/Y and '22E +22%/-2% Y/Y, respectively.
- Price Action: META shares traded lower by 2.10% at $148.55 on the last check Monday.
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