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The latest round of job cuts at Meta Platforms bolsters Wall Street’s confidence in revenue growth potential in the coming months and year. The social media giant on Tuesday said it would cut 10,000 positions and close 5,000 open positions as it focuses on cutting costs. This is another round of exceptions after Meta announced in November that it would lay off 13% of its workforce. CEO Mark Zuckerberg has called 2023 “the year of efficiency” for Meta as he seeks to convince frightened investors that he can control his spending after pouring resources into his metaverse investments. Despite the blow to workers, Wall Street sees the latest round of layoffs as a sign that Meta Platforms is on track with its efficiency plans. Analysts expect the company to continue to cut costs, which should ensure higher forecasts going forward. Bank of America’s Justin Post raised his 2024 earnings-per-share estimate on Meta by 4% and raised his price target to $230 from $220. The Post called the company in a note on Tuesday a “rare story of EPS gains,” saying the cuts should set Meta up for higher profits once the economy picks up again. “With cost reductions, increased reel monetization, and the benefits of AI/ML, we believe that Meta’s revenue and profits can grow faster than the overall market over the next 3-5 years,” he wrote. Wells Fargo’s Brian Fitzgerald also raised the investment bank’s price target to $280 from $250 a share, suggesting upside potential of about 44% from Tuesday’s close. Job cuts could occur in the company’s Reality Labs division, signaling Meta’s shift in focus from the metaverse to artificial intelligence, Jefferies analyst Brent Till said Tuesday. “In addition to being the division with the most limited impact on company growth, we believe these cuts are a sign that META is refocusing from the Metaverse to AI,” he wrote. Till also sees the equity’s risk-reward ratio as attractive, expecting a positive upward revision in earnings per share over the next few quarters. While Wall Street has generally praised Meta’s latest move toward efficiency, some analysts say there’s still a lot of work to be done. Mizuho’s James Lee noted that investment in the metaverse still accounts for the majority of revenue, while R&D spending as a percentage of revenue is higher than its peers. Bernstein’s Mark Shmulik expects investors’ attention to be refocused on Meta’s growth story now that it’s “a leaner, meaner company” that has already accounted for most of its cost-cutting efforts. job security is unclear until the end of the year,” he said in a note to clients on Wednesday. “But it’s hard not to be supportive of a CEO who seems charged once again to reshape the company in his own image.” —Michael Bloom of CNBC provided the coverage.
Credit: www.cnbc.com /
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