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Meta surges with record $196 billion gain in stock market value

Published 02/02/2024, 06:20 AM
Updated 02/02/2024, 05:31 PM
© Reuters. FILE PHOTO: A Meta logo is seen at the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France, June 14, 2023. REUTERS/Gonzalo Fuentes/File Photo

By Samrhitha A, Aishwarya Venugopal and Chuck Mikolajczak

(Reuters) -Meta Platforms added $196 billion in stock market value on Friday, marking the biggest one-day gain by any company in Wall Street history after the Facebook (NASDAQ:META) parent declared its first dividend and posted robust results.

Meta's stock surged 20.3% for the session, also recording its biggest one-day percentage increase in a year and its third biggest since its 2012 Wall Street debut. Its stock market value now stands at more than $1.22 trillion.

Days ahead of Facebook's 20th anniversary, Meta late on Thursday authorized an additional $50 billion in share repurchases and said its quarterly dividend would be 50 cents per share.

While dividends are associated with mature, slow-growth companies, Meta's is the fourth offered by Wall Street's most valuable technology-related heavyweights, along with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA).

"Paying a dividend suggests the company wants to reboot its reputation and be taken more seriously. But ultimately the amount being paid is only a token gesture," said Dan Coatsworth, an investment analyst at AJ Bell.

Friday's increase in Meta's market capitalization eclipsed the previous record held by Amazon (NASDAQ:AMZN), which saw its market value surge by $190 billion on Feb. 4, 2022 following a blowout quarterly report. One day before, Meta lost over $200 billion in value, the biggest loss in U.S. stock market history, after it issued a dismal forecast.

Meta's dividend plan means a hefty payout for CEO Mark Zuckerberg, who owns about 350 million Meta Class A and Class B shares. The Facebook co-founder could get about $175 million every quarter.

Optimism about the potential for artificial intelligence contributed to a 24% rally in the S&P 500 last year, with Meta, Nvidia, Microsoft and Broadcom (NASDAQ:AVGO) recently hitting record highs. With Friday's gain, Meta is now up 35% in 2024.

The world's biggest social media company flagged strong ad sales and a rebound in user growth during its fourth-quarter results that saw its revenue surge 25%. Its forecast for current-quarter revenue also exceeded analysts' estimates.

Surging revenue, combined with an 8% drop in costs and expenses after eliminating more than 21,000 jobs since late 2022, allowed Meta to triple its net income to $14.02 billion.

"The 'Year of Efficiency' has paid off, with both headcount and costs dropping, and Meta exceeding our expectations for full-year 2023 ad revenue," said Jasmine Enberg, principal analyst at Insider Intelligence.

While Meta's dividend is small compared to many companies, it could make its stock more attractive to a broader swathe of investors, including exchange-traded funds focused on stocks that pay dividends.

Meta's dividend yield is about 0.4% following Friday's stock rally. By comparison, Apple's dividend yield is about 0.5%, while Microsoft's is 0.7% and Nvidia's is under 0.1%, according to LSEG.

"This can start attracting investors who really do look for dividends and more steady income," said Brian Jacobsen, Chief Economist at Annex Wealth Management.

© Reuters. FILE PHOTO: A Meta logo is seen at the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France, June 14, 2023. REUTERS/Gonzalo Fuentes/File Photo

Exchange Traded Funds (ETFs) that are focused on U.S. dividend payers have assets of over $400 billion, accounting for just over 5% of the entire domestic ETF universe, according to data from Morningstar Direct.

Meta has been spending billions of dollars over the past decade to boost its computing capacity for generative AI products it is adding to Facebook, Instagram and WhatsApp, and to hardware devices such as its Ray-Ban smart glasses.

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