Stock Analysis & Ideas

Raymond James Pounds the Table on Meta Stock

On the surface, companies laying off big chunks of their workforce doesn’t sound like much to rejoice about, but the rules are different in the stock market. Just like the markets have been reacting adversely to the strong job reports – which signal more rate hiking activities could be in the cards – the inverse appears to be true.

As such, the announcement of another round of layoffs at Meta (NASDAQ:META) drew applause from investors – particularly those keeping an eye on the bottom-line.

On Tuesday, the social media giant said it is cutting another 10,000 positions and putting on hold 5,000 open jobs. The latest reduction to the workforce comes in the wake of November’s job cuts – which saw 11,000 employees (~13% of the total) given their marching orders. Combined, the layoffs amount to 21,000 employees – roughly 24% of the prior headcount.

It’s all part of Meta’s efforts to rein in expenses, become more efficient, and improve its business performance against a backdrop of the new economic reality.

Due to the cull, Meta reduced its total opex for 2023 from the prior $89-95 billion to $86-92 billion. This takes into account the expected impact of the layoffs and other cost reduction endeavors.

Mirroring investor sentiment (the shares climbed 7% higher in response to the news), Raymond James analyst Aaron Kessler sees the latest act as a good move.

The analyst increased his 2023/2024 EBITDA by 5%/8%, respectively, and raised his 2023/2024 GAAP EPS estimates from $9.84/$10.75 to $11.10/$13.36.

As a result, Kessler raised his price target on META from $220 to $238, while reiterating his Outperform (i.e., Buy) rating. (To watch Kessler’s track record, click here)

The analyst sees enough reasons to back the stock including: “1) we continue to expect long-term ad growth of 5-10%; 2) we expect continued monetization of newer platforms and formats (e.g., Reels, click-to-messaging); 3) we expect improving margin outlook given recent cost reductions with greater leverage in 2024; and 4) we believe valuation is attractive at 10x 2023E Family of Apps EPS.”

So, that’s the Raymond James view, what does the rest of the Street have in mind for Meta? Based on 36 Buys, 6 Holds and 3 Sells, the analyst consensus rates the stock a Moderate Buy. (See Meta stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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