Meta’s (META) cost-cutting measures are working and should have a positive effect on the company’s bottom-line, Argus Research Senior Securities Analyst Joseph Bonner told Yahoo Finance Live (video above).
Recently, Bonner upgraded the Facebook parent company to a Buy with a price target of $270, noting he believes Meta’s cost-cutting is going as far as it needs to, even when compared to peers such as Alphabet (GOOG, GOOGL) and Microsoft (MSFT).
“When you look at Microsoft, Alphabet, you’re talking 5% [or] 6% cuts,” said Bonner. “This is a 24% cut. So it’s a big cost cutting measure to save about $8 billion on their 2023 expense projections. So a serious measure in a kind of low revenue growth environment, very uncertain revenue growth environment, and kind of giving the market what it wants, giving it profitability, probably increased profitability and cash flow.”
Bonner added that Meta’s efforts in AI have already helped improve the company’s operations.
“AI is kind of the soup du jour right now, but, really, Meta has put a lot of investment and money behind AI, he said. “[They’re] looking to get past that Apple ad tracking issue through AI and increase the ROI on advertising, regaining that way to target ads through AI.”
‘This new economic reality’
Meta has conducted several waves of layoffs, affecting 21,000 employees, over the last few months. In March, Meta announced it would lay off 10,000 workers, and close off another 5,000 unopened positions. Likewise, in November, the company laid off 11,000 employees, which at the time composed about 13% of Meta’s corporate workforce.
In a March Facebook post, Zuckerberg described the rounds of layoffs as key to the company’s “year of efficiency” push as Meta prepares for a difficult macroeconomic future.
“At this point, I think we should prepare ourselves for the possibility that this new economic reality will continue for many years,” Zuckerberg wrote. “Higher interest rates lead to the economy running leaner, more geopolitical instability leads to more volatility, and increased regulation leads to slower growth and increased costs of innovation. Given this outlook, we’ll need to operate more efficiently than our previous headcount reduction to ensure success.”
To that end, Bonner’s revenue expectations for Meta are muted in the near-term.
“We’re in a tough revenue environment, [and] digital advertising is slow,” he said. “If consensus can be believed, its revenue will be down about single digits this quarter, maybe down a little bit next quarter. So, I really am not looking for a revenue recovery until later in the year, much later in the year.”
Meta shares are down about 3% over the last 12 months and up approximately 73% year-to-date.
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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Source: https://finance.yahoo.com/news/meta-is-giving-the-market-what-it-wants-analyst-says-191031349.html