Meta makes Wall Street history with $196 billion market cap gain

Days ahead of Facebook’s 20th anniversary, Meta authorised an additional $50 billion in share repurchases and announced a quarterly dividend of 50 cents per share. While dividends are commonly associated with mature companies, Meta has become the fourth among Silicon Valley’s leading tech giants, alongside Apple, Microsoft, and Nvidia, to offer dividends.

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In 2023, Meta also reduced its headcount by 22 percent, demonstrating a commitment to cost-cutting measures, as per a Bloomberg report.

“The ‘Year of Efficiency’ has paid off, with both headcount and costs dropping, and Meta exceeding expectations for full-year 2023 ad revenue,” Jasmine Enberg, principal analyst at Insider Intelligence told Reuters.

Highest Highs, Lowest Lows

During the session, Meta’s stock surged by 20.3 percent, marking its most significant one-day percentage increase in a year and the third-largest since its 2012 Wall Street debut. As a result, Meta’s current stock market value has surpassed $1.22 trillion.

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The increase in Meta’s market cap surpassed the previous record set by Amazon, which experienced a $190 billion surge on February 4, 2022. This followed a remarkable quarterly report. One day before, Meta faced the largest loss in United States stock market history, losing over $200 billion, after issuing a dismal forecast.

“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,” investment analyst Dan Coatsworth from AJ Bell told Reuters.

“This can start attracting investors who really do look for dividends and more steady income,” Brian Jacobsen, Chief Economist at Annex Wealth Management told the agency.

“Solid execution, faster growth, and increased capital structure efficiency improve the outlook from here. Meta’s AI pipeline for both users and advertisers is robust, with more tools set to launch and scale throughout ‘24,” Brian Nowak, an analyst at Morgan Stanley said in a note on February 2, Bloomberg reported.

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CEO Payout and Future Outlook

Meta’s dividend plan implies a substantial payout for CEO Mark Zuckerberg, who owns approximately 350 million Meta Class A and Class B shares. Zuckerberg could receive around $175 million every quarter. With a positive outlook for artificial intelligence (AI), Meta is up 35 percent in 2024, contributing to a 24 percent S&P 500 rally last year.

Strong ad sales and a rebound in user growth contributed to Meta’s fourth-quarter results, leading to a 25 percent surge in revenue. The company tripled its net income to $14.02 billion, driven by a notable 8 percent reduction in costs and expenses after eliminating over 21,000 jobs since late 2022.

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While Meta’s dividend yield is modest at about 0.4 percent, it could attract a broader range of investors, including those interested in stocks with dividends. This move aligns with a trend in Exchange Traded Funds (ETFs) focused on US dividend payers, which currently hold assets exceeding $400 billion, constituting over 5 percent of the domestic ETF universe.

Meta has invested billions over the past decade to enhance its computing capacity for generative AI products integrated into Facebook, Instagram, WhatsApp, and hardware devices such as its Ray-Ban smart glasses.

(With inputs from Bloomberg and Reuters)

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Published: 03 Feb 2024, 09:49 AM IST