Brad Gerstner, Chair and CEO of Altimeter Capital Management LLC, penned an open letter to Meta Platforms (NASDAQ:META). Altimeter owns more than 2 million shares of Meta Platforms and has been a long-time investor. The letter was addressed to CEO Mark Zuckerberg, suggesting three definite steps to streamline Meta’s operations and regain investor confidence.
As per Gerstner, firstly, Meta must cut down its workforce by 20% to control employee expenses. Moreover, this will bring Meta’s employee base to near 2021 levels when the company was adequately staffed and operating at the same business levels as today.
Secondly, Gerstner strongly recommends that Meta should slash its capital expenditures by at least $5 billion annually and bring them down to nearly $25 billion.
Thirdly, Meta must cut down on its “supersized and terrifying” expenses toward the development of the metaverse. With the heightened interest rates and uncertain economic scenario, investing huge dollars in the Metaverse is risky. According to Gerstner, Meta should not spend more than $5 billion per year on metaverse projects, as opposed to its planned annual investments of $10-$15 billion, which could take another ten years to become profitable.
As per Gerstner, these steps will help Meta bring back its “mojo… get fit and focused.” Moreover, these steps would double Meta’s free cash flow to nearly $40 billion as well as bolster its share price.
On the earnings front, Meta is slated to release its third quarter Fiscal 2022 results on October 26, after the market closes. The Street expects Meta to report adjusted earnings of $1.89 per share in Q3. Meanwhile, the consensus for revenue is pegged at $27.43 billion.
Will Meta Stock Go Up?
Caught in a series of poor quarterly results and a tough macroeconomic backdrop, META stock has fallen 61.7% so far this year. Nonetheless, analysts have an average Meta Platforms price target of $199.55 on TipRanks. This suggests a 12-month upside potential of 53.8%. The most bullish price target on META stock is $275, implying a massive 112% upside potential to current levels.
Also, analysts have a Moderate Buy consensus rating on Meta stock based on 25 Buys, seven Holds, and two Sell ratings.