meta platforms

With a loss of around 65% Meta Platforms (NYSE: META) was the worst-performing FAANG stock in 2022. The stock rebounded after Q4 2022 earnings release as its CEO Mark Zuckerburg touted 2023 as the “year of efficiency.”

A report from Financial Times meanwhile suggests that at least so far, the company is still in a mess. Two employees told the publication that lack of clarity about budgets and headcount is impacting work and some have complained that due to the uncertainty “zero work” is getting done.

Notably, last year, Meta Platforms laid off 11,000 employees which was 13% of its workforce. Reportedly, Zuckerburg is planning more layoffs which has hurt the morale of employees.

During the Q4 2022 earnings call, Meta Platforms lowered its 2023 expense guidance to $89 billion-$95 billion which was $5 billion below the previous guidance.

Zuckerburg said that the company wants 2023 to be the “year of efficiency.” Increasing efficiency and productivity were discussed quite prominently during the earnings call. Markets also gave a thumbs up to the efforts and the stock soared after the earnings release.

Zuckerburg Sees Metaverse as a Long-Term Growth Driver

During the earnings call, Meta Platforms also announced a $40 billion stock buyback. Zuckerburg reiterated that while the company’s short-term priority is AI, in the long-term, it sees metaverse as a key growth driver.

Some Meta Platform investors have been wary of the company’s metaverse investments which have been a drain on its profits. However, many analysts believe that the metaverse is crucial for the company’s long-term success. There is a list of companies that are a play on metaverse.

Meta Platforms is also eliminating some middle management roles. During the earnings call, Zuckerburg said, “By reducing layers of management, it’s made information flow through the company better, and it will help us make better products and attract and retain better people.”

Meta Platforms is a “Mess” Says One Employee

Meanwhile, the Financial Times reported that one Meta Platforms employee said, “Honestly, it’s still a mess.” They added, “The year of efficiency is kicking off with a bunch of people getting paid to do nothing.”

There has been a wave of tech layoffs in 2023 even as the overall job market is quite tight. The US economy added over half a million jobs in January which shattered estimates. A strong job market leads to higher wage growth which makes the Fed’s job of lowering inflation even more difficult.

Talking of Meta Platforms, the company faces several headwinds. Its user base has almost saturated while Apple iPhone targeting rules have hampered its targeting capabilities. There is anyways a global furor over targeted ads.

Also, the digital ad market is slowing down. To make things worse, the competition is rising with the likes of Amazon and TikTok vying for a share of digital ad dollars. Last year, the combined market share of Google and Facebook in the US digital ad market fell below 50%.

Meta Platforms Faces Competition from Amazon Also

Incidentally, Amazon now ranks third in the digital ad market and the company’s advertising business generated revenues of $11.6 billion in Q4 2022, a YoY rise of 19%. In the same quarter, Meta Platforms and Google witnessed a fall in their revenues.

TikTok has been a tough competitor for both YouTube and Facebook. YouTube’s revenues have now fallen for two straight quarters. At the same time, Meta Platforms’ revenues fell YoY for three consecutive quarters.

Last year, for the first time ever, Meta Platforms reported a YoY fall in revenues. The lower end of the company’s Q1 2023 guidance implies a fall in revenues. However, the upper end of guidance signals a rise in revenues.

Meanwhile, most analysts were impressed with Meta Platforms’ Q4 2022 earnings call and recommended buying the stock.

However, as reports suggest, the company still has a long way to go as it strives for its “year of efficiency.”

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