Meta Platforms (NASDAQ:META) shares have made a remarkable recovery this year, reaching a 1-1/2 year high in late July after hitting an almost 8-year low in November last year. Following a peak in July 2021, Meta Platforms faced challenges in 2022 as CEO Zuckerberg pursued his vision of the unpopular and unprofitable metaverse virtual reality. This direction led to the company falling short of revenue expectations and experiencing a significant drop in its user base. However, a renewed focus on its core businesses has led to increased advertising revenue and subscriber growth, propelling the stock to a rally of over +140% this year.
Meta Platforms made substantial investments in its Reels format, which features short-form videos akin to those found on competitor TikTok. This strategic shift toward Reels has effectively amplified consumer engagement across its Facebook and Instagram social networks, consequently boosting advertising earnings. During a conference call in July, the company indicated a potential revenue growth of up to 20% for the current quarter. Concurrently, Meta undertook significant workforce reductions and cost-cutting measures as part of CEO Zuckerberg’s declared “year of efficiency.”
Instagram, a photo and video-sharing service under Meta Platforms, has unveiled Threads, a competitor to X (formerly Twitter). This new addition, available in 32 languages, is projected by Evercore ISI to generate around $8 billion in annual revenue within the next two years and attain nearly 200 million daily active users. Currently ad-free, Threads will remain so until it reaches a user base on the trajectory toward 1 billion users. Additionally, CEO Zuckerberg revealed plans for a web version of Threads accessible on desktop platforms, facilitating posting, feed viewing, and interaction with others’ posts.
Much of Meta Platform’s year-to-date stock gains are attributed to increased investor confidence in the company’s earnings outlook. Bloomberg reports that the stock has received the highest number of buy ratings from analysts in at least two years. Wells Fargo Securities recently upgraded Meta Platforms from equal weight to overweight, stating, “We misjudged Meta. We now perceive the company as a story of accelerating growth, with emerging AI opportunities in messaging, ad tools, and new consumer offerings.”
Based on Bloomberg data, Meta Platforms (NASDAQ:META) ranks as the second-highest spender among mega-cap technology companies, trailing only Amazon.com. The company has outlined a spending projection of up to $30 billion for this year, with expectations of even higher spending in 2024. Notably, these investments are notably channeled into bolstering artificial intelligence (AI) initiatives. Nevertheless, Meta’s Reality Labs division, responsible for its metaverse vision, is anticipated to report considerably greater losses this year compared to the previous year. Accuvest Global Advisors anticipates that Meta’s AI strategies will drive substantial revenue growth and remarked, “We endorse prudent spending, as long as it avoids ventures like the metaverse.”
Featured Image: Unsplash @ Mohamed Nohassi
Author Faith Yakubu 
