Meta's stock ended a successful string of nine consecutive advances--the longest such streak since the company first went public in 2012.Facebook's online advertisement arm appears to be reliably consistent, when compared with other competitors such as Snap, which remains in a difficult position.This year, Meta has been one of the leading stocks in the S&P 500, despite dropping by two-thirds of its value in 2022.
A year ago, Meta's stock was in freefall as Wall Street began to worry about the very survival of the business. But after Mark Zuckerberg's company, previously known as Facebook, reported better-than-expected second-quarter results last week and issued encouraging guidance, Meta shares shot up to their highest since early 2022.Though it fell on Monday, Meta's stock jumped 11% in July, the ninth consecutive month of gains for the stock, the longest such stretch since the Facebook IPO in 2012. The stock is now within 17% of its record high from September 2021.The drastic turn-around can be attributed to the cost-lowering measures Meta implemented at the close of 2022 and start of 2023 which included approximately 21,000 job losses, and a revival in Facebook's online advertising business. This was helped by Apple's iOS privacy change and the troubled economy resulting in three sequential sales declines. Additionally, Meta's investments in artificial intelligence are now bearing fruit, with more and more people watching short videos on the Reels product, and the success of the Twitter competitor Threads has investors hoping Meta can turn the messaging app into a major success.Zuckerberg said on last week's earnings call that he's "quite optimistic" about Threads and its development, pointing out that it "was built by a small team on a tight timeline" and "blew up and created a big opportunity immediately". He added, however, that the company is not looking to monetize the app anytime soon.Analysts at Canaccord Genuity said in a note after Meta's earnings report, "With decreasing competition, ongoing AI-led enhancements in targeting capabilities, and several exciting new products and monetization strategies, we think that the on-going Meta transformation has a considerable future ahead." and gave the stock a buy rating.
This year Meta has been the second strongest stock in the S&P 500, surpassed only by Nvidia. It was among the worst performers last year, dropping by two-thirds in value. This decline began in late 2021 when former Facebook staff member turned whistleblower Frances Haugen disclosed thousands of pages of internal records. These records indicated Facebook had not rectified several issues that were having a negative influence on its apps, one being Instagram's contribution to teenagers' mental health issues. Due to the public outrage from the affair, CEO Mark Zuckerberg became the target of ire from legislators, furthering the already existing trust issues the platform had been facing for years.When the stock started its descent, Zuckerberg rebranded the company to Meta and informed shareholders of his aims to invest billions of quarters in virtual and augmented reality technologies to create the so-called metaverse sometime in the distant future.
Apple presented the greatest issue. Executives had warned that the updated iOS privacy precautions would hamper Facebook's capacity to precisely target ads, but the full effects of the situation didn't hit home until earnings reports showed lower-than-expected figures. The worsening of the Ukraine crisis and Russia's placement of Facebook and Instagram on the blacklist also posed a challenge. While Russia makes up only 1.5% of sales, every bit of income counts, particularly when advertisers are taking a break due to a flagging economy and the growing popularity of TikTok. Wall Street became increasingly concerned about Meta's investment in the metaverse. In response, Meta initiated cost-cutting measures and Zuckerberg declared 2023 "the year of efficiency" in the beginning of the year. In November, he mentioned to Meta's employees that the company was taking steps to become leaner and more cost-efficient, and their hiring freeze had been extended into Q1. This led to a 3% yearly increase in earnings during the first quarter, much of which was due to Chinese businesses taking advantage of the loosening of Covid-related restrictions to make substantial investments in Facebook and Instagram ads targeting global consumers.
Meta executives stated that their business was improving due to a rise in usage of their Advantage Plus service, particularly from retailers, and their Reels short-video service. This comes as TikTok's future in the U.S. is up in the air due to potential national security issues. However, there continue to be worries surrounding the company, especially their Reality Labs unit which lost an immense amount in 2020 and 2021. Amazon is gaining greater traction in the ad space, and Apple has entered the VR market with plans for a new headset. Furthermore, Meta is still feeling the pressure from governments due to data privacy regulations. Despite this, the company's stock has been reaching 17-month highs as the outlook is significantly better than one year ago.
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