Facebook owner Meta Platforms (META 1.13%) was outpacing the broad market in morning trading on Monday, with shares up 5% as of 11 a.m. ET compared to a 0.6% gain in the S&P 500. That pop erased a portion of Meta's recent decline, but the social media giant remains down significantly so far in 2022.
Investors have found more reasons to buy the stock following its first-quarter earnings report, which it delivered after the closing bell Wednesday.
Key metrics including user numbers and advertising revenue rose at the start of 2022. Some investors were bracing for flat results or modest declines in these areas after Meta Platforms reported surprisingly weak growth in Q4. Management also cut its forecast for expenses.
Meta's stock jumped in response to the operating update. Monday morning's share price increase appears to be driven by rising optimism from investors seeking a bargain after shares collapsed in recent months.
Meta Platforms' business remains under stress. User growth is slowing for the core Facebook and Instagram platforms, and it's still working on boosting the effectiveness of advertising on its platforms following Apple's user-privacy upgrades. There are no quick fixes for either of these challenges.
However, the company still boasts some impressive financial metrics, including the ability to generate gobs of cash and profits. Its earnings outlook is brighter, too, considering its plans to cut expenses.
Meta Platforms still plans to invest more than $30 billion in its business in 2022, including big bets on the emerging metaverse and augmented reality technology. Spending at that scale could translate into some enduring competitive advantages in the coming years, assuming CEO Mark Zuckerberg and his team put the right strategy in place to achieve leadership in these areas. Some investors remain skeptical. But others are clearly taking a more optimistic view about Meta's future.