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Meta Stock Rose After Morgan Stanley Predicted a 10% Increase in Earnings Due to Cost Reductions.

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Meta Stock (NASDAQ:META)

According to a report written by an analyst working for Morgan Stanley named Brian Nowak, substantial cost reductions reported at Meta Platforms (NASDAQ:META) could lead to earnings that surpass the $11 per share mark. Additionally, such cost reductions could also lead to an increase in the company’s earnings for the third quarter. As a result, Meta stock surged in the market today.

Nowak stated that Meta Platforms (NASDAQ:META) has continued to lower operating expenditures [opex] and capital expenditures [capex] forecasts throughout the year, similar to what was done in previous years; nevertheless, “This this is the first news of prospective layoffs as departments restructure.”

After projecting growth from a decrease to the base of $1.8 billion, Nowak stated that making cuts of 10% or more to a run-rate operating expenditure total that was $18.5 billion as of Meta Platforms (NASDAQ:META) second quarter would result in around $5 billion in OPEX savings in 2023.

That would result in a reduction in OPEX in 2023 to around $77 billion, excluding depreciation and amortization; assuming revenue remains the same, this would lead to an increase in EBITDA of almost 11 percent, to $48.6 billion.

Nowak stated that Meta Platforms (NASDAQ:META) expects to earn $9.90 per share in 2023; thus, a reduction in operating expenses by $3 billion to $8 billion would increase earnings by 43 cents to $1.99 per share.

Nowak mentioned that important triggers for achieving Meta Platforms (NASDAQ:META) third-quarter earnings-per-share targets were “confirming this reduction,” “clarity on revenue,” “engagement [and] time spent,” and “monetization of reels.”

Nowak believes Meta stock will reach $225 per share and has assigned an overweight rating to the company. Thursday’s trading session ended with a gain of 0.5% for Meta stock, which brought the price to $142.82.

Wednesday saw a rise in the price of Meta stock following a report discussing the company’s plan to reduce staff without laying off employees.

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