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Meta Platforms (NASDAQ:META) got the market’s attention with its latest earnings report and pledge for efficiency. As much as the report helped, it was the pledge for efficiency that has the market moving higher and in the process of reversing. The results were better than expected but a far cry from what they were in years past (like last year), and revenue is not expected to grow significantly from now on.
However, the efficiency will improve the company’s margin and increase its earnings power, which is why shares are reversing.
Within that story, the latest news is another round of job cuts. This time the company is cutting 10,000 jobs and another 5,000 open positions for an effective reduction worth 15,000 employees. This is on top of the 15% reduction announced last fall, bringing the total reduction to about 25% of the workforce. The company also lowered its expected expenses for the year and cut the range by $3 billion or more than 3% at the high end of the range.
The company is also moving to cut out non-performing assets to focus on core business. Among these moves is the wind-down of NFT-related business and the possible divestiture of Kustomer. Kustomer is a business service software company that Meta bought for about $1 billion last year. The ultimate end of the operation is unclear as there are no concrete plans, but a total wind-down is not out of the question. Another possibility is that founders will raise capital and repurchase it at a hefty discount to the original sale price.
Meta Platforms has been on Marketbeat’s Most Upgraded stocks list for the last month, and that trend is not ending now. The plans to cut jobs and divest assets sparked another six analyst price target increases on top of the 35 other upgrades and price target increases posted since the Q4 earnings report.
The latest include increases from Wedbush, Robert W. Baird, Mizuho, and Oppenheimer, who have the stock trading between $230 to $260 compared to the Marketbeat.com consensus of $208. The consensus is trending higher and 8% above the current price action, while the latest range of new targets has the stock up another 10% at the low end.
The institutional activity is the most telling part of this turnaround story. The institutions gave the efficiency pledge a resounding vote of approval that resulted in a massive inflow of capital. The institutions bought more than $100 billion net of selling in Q1 2023, and the buying was broad. Not only is this the most activity in a single quarter in years, but it is equal to all the activity over the last few years and they are still buying.
The institutions hold about 61% of shares to continue supporting share prices for the foreseeable future.
The price action in Meta Platforms has suggested a reversal for the last month or so, and now it is in play. The price moved above the $187 resistance target but needs to get above the $197 target to take a more-bullish stance.
In that scenario, price action may pop and gain 5% to 10% before peaking near term. The next entry opportunity will be a pullback to retest support at $197-$187. If Meta can’t get above $197 now, it may remain range bound until later in the year.
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