After a tough 2022, Meta Platforms NASDAQ:META came back fighting this year for Mark Zuckerberg’s ‘Year of Efficiency’ and like the rest of the world, has jumped on the AI bandwagon.
Markets are impressed with Meta Platforms this year and its stock has more than doubled in the first six months of 2023. Investors in the stock are hoping for more insights around Threads in Wednesday’s earnings release, and to see how the social media giant finishes the year.
Investors were not impressed with the Metaverse
Meta Platforms put all its eggs in one basket with the Metaverse in the past year. But, this virtual world remains obscure and failed to attract broad appeal, lacking a killer app that will help it take off. It also drained energy and resources, much to the disdain of investors, especially at a time when the tech sector was facing its own challenges.
“The social media giant paid the price last year, but it is getting its mojo back in 2023 with a series of initiatives,” says Nikos Tzabouras, Senior Market Specialist at CFD broker FXCM. “CEO Mark Zuckerberg dubbed it the “Year of Efficiency” and expenses have already shrunk in the first quarter. Furthermore, he shifted focus away from the Metaverse and jumped onto the AI bandwagon, but it has a lot of catching up to do.”
Building on this, Meta Platforms’ financials showed improvement in the first quarter, advertising headwinds subsided and the user base grew to more than 3 billion daily active people (DAP) on average for the family of apps.
Meta’s renewed vigor became evident in July with the launch of Threads, a text-sharing application to rival Twitter. Signups exploded to over 100 million within just five days, helped by the integration with Instagram.
“This is a great start, but Meta doesn’t have a very good track record when it comes to launching standalone applications,” commented Tzabouras.
Are Twitter’s problems creating an opportunity for Meta?
But with Elon Musk now rebranding Twitter, some analysts reckon Meta Platforms has more room to breathe. Musk has shocked social media users the world over by announcing that Twitter will be re-branded as ‘X’. The re-brand is part of Musk’s long-term ambition of turning Twitter into an “everything app” that will offer everything from news, instant messaging, banking and more
However, many social media users consider this to be the final straw in terms of Musk’s controversial changes to Twitter, which have included a subscription fee for blue-tick verification and the ability for users to see how many views their posts have.
With alternative social media apps such as Threads and Mastodon now rising in popularity, how many current Twitter users will continue to use X? The timing could not be better for Meta Platforms and Threads.
Time to banish the Meta bears?
Headlines may be preoccupied with Zuckerberg’s plans to fight Musk, but investors are more concerned about whether the social media mogul has what it takes to deliver a sucker-punch to Meta bears. Growth has been slower at Meta for a while, but the market has largely moved to accept this. A 3% lift in revenue last quarter was met with celebration, despite a sharp fall in profits thanks to higher costs.
“Restructuring costs are meant to be around $90bn for the full year, and proof this goal post hasn’t moved will go down well with the market,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown. “As will talk of a better-than-expected advertising performance. Specifically, it would be good to see that the price of ads isn’t being slashed to such a degree, because this would signal a more organic level of demand recovery.”
Finally, as has been the case for some time, further steer on plans for AI work will be the holy grail. Meta’s been very woolly on details and Meta investors will want to see some concrete progress and planning before too long.
Markets like what they see from Meta Platforms this year, and its stock more than doubled in the first six months after the collapse of 2022. The market will be looking forward to more insights around Threads and if the firm can maintain the momentum of its cost-cutting efforts.
