Meta stock surges after earnings as ‘year of efficiency’ pays off

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Meta posted a positive second-quarter performance and provided rosy forecasts for the period.

The report was hailed by analysts for its positive results. They cited improved targeting of ads, an increase in Reels’ monetization, and the payoffs from the cost-cutting initiatives as the highlights.

Meta stocks surged by 4% on Thursday

Meta shares surged 4% Thursday after the company posted stronger-than-expected results for the second quarter and gave guidance for the current period that topped analysts’ estimates. The stock had traded higher earlier in the day than it has since January 2022.

Refinitiv’s analysts had expected $2.91 earnings per share, but the company reported $2.98. According to Refinitiv, revenue increased by 11% over the past year, to $32 Billion, exceeding analyst estimates of $31.12 Billion.

Facebook’s parent company has forecast revenues between $32 and $34.5 billion for the third quarter. This is above what analysts expected, which was $31.3 billion.

Results show an increase in advertising online as well as that CEO Mark Zuckerberg’s “year of efficiency,” which focuses on cutting costs or improving profitability is working.

While long-term investment behind key goals remains a priority (in terms infrastructure and talent), management is expected to continue balancing growth with increased returns, according to Goldman Sachs’ Eric Sheridan. Sheridan maintains a Buy rating for Meta’s shares.

Some analysts were pleased with the results. They cited the high engagement rate, the rising monetization for TikTok’s rival Reels, and the return on investment in artificial intelligence.

Bank of America Analyst Justin Post raised his Meta price target to $375, up from $350. He also reiterated that he believes the shares are a buy.

Post reported on Thursday that “Meta has regained its momentum with the Reels and a revamped tech stack, increasing their share of the market.”

Post and some other analysts have expressed concern about Meta’s investment in the metaverse. This is reflected in the increasing losses of the Reality Labs division. Meta said that the division’s operating losses will continue to grow in 2019 and 2024.

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