What happened
Shares of Meta Platforms (META +6.67%) soared by 138.5% in the first half of 2023, according to data provided by S&P Global Market Intelligence.
The sharp surge has more than doubled the social media giant's market capitalization from $308 million at the beginning of the year to $753 million, making it a candidate to hit the $1 trillion capitalization milestone.
Image source: Getty Images.
So what
With the release of Meta's 2022 fourth-quarter and full-year earnings report, CEO Mark Zuckerberg declared that the company's management theme for 2023 will be the "Year of Efficiency." This focus on being stronger and nimbler hit the right notes with investors, and their optimism sent the social media giant's shares soaring. This declaration, along with the hype generated by generative artificial intelligence's promise, caused Meta Platforms' share price to shoot up for most of the first half.
NASDAQ: META
Key Data Points
Earnings-wise, the company still needs time to reduce its cost base, as evidenced by its fiscal 2023 first-quarter results. Revenue inched up 3% year over year to $28.6 billion, but net income tumbled by 24% year over year to $5.7 billion. However, investors were cheered by the fact that daily and monthly average users continued their upward climb. Daily average users clocked in at 2.04 billion for Q1, with both quarter-over-quarter and year-over-year rises. Monthly average users posted the same trend, with a 0.9% quarter-over-quarter increase and a 1.8% year-over-year rise to 2.99 billion. These numbers gave investors confidence that the social media company could continue growing even as it made the effort to rightsize its business.
Now what
Meta Platforms has completed three rounds of layoffs through May, eliminating almost 10,000 roles and bringing the company's headcount back to where it was in mid-2021. Zuckerberg has said that several smaller rounds of layoffs could carry on but that the bulk of the reductions have been completed. The sizable layoffs should reduce general and administrative expenses, but the company has already recognized $523 million of severance charges in Q1 with another $500 million or so to be recorded in the remaining three quarters of 2023.
Meta Platforms also launched a new social media platform, Threads, earlier this month, and it has seen 100 million sign-ups in just five days. The new platform is positioned as an alternative to Twitter and is part of the company's Instagram service. As both these platforms are linked, users will find it easy to download a set of contacts onto Threads to immediately start following, thus lowering the barrier for adoption and making the app stickier. Zuckerberg has remarked that this milestone was achieved with just organic demand and that the company has yet to introduce promotions to encourage further downloads and usage of Threads, opening up a potential new revenue stream for Meta Platforms.
