2) Progress with AI and Reelsĭespite the more disciplined approach towards costs, Meta remains committed investing in R&D. Assuming a P/E multiple of x15, this could strengthen Meta's market capitalization by $22.5 to $30 billion. In sum, I believe it is reasonable to assume that Meta's savings ambitions will likely reduce operating expenses by approximately $1.5 - $2 billion annually. Moreover, Meta has also announced that the company will aim to reduce its real estate footprint and other operating costs, which could likely add between $625 million - 1,050 million of additional savings.Īlthough it is hard to estimate how the cost savings will translate into higher equity valuations, I have previously calculated that Meta's cumulative cost savings announced YTD may add as much as $30 billion of economic value. Assuming that the affected workforce (skewed towards HR and other support functions) received an average annual salary between $115,000 and $135,000, the lay-offs could translate into annual cost-savings of $1.25 billion - $1.37 billion. In early November, Zuckerberg has shared a memo where he announced that the social media giant could lay off as many as 13,000 employees, which would be approximately 13% of Meta's headcount. While this might have been true - and perhaps still is to some extent - investors should consider that Zuckerberg has now clearly started to push for more cost discipline. One key argument why Meta stock has shed more than $600 billion of market capitalization is anchored on the markets' perception that Zuckerberg has failed to build a culture that values profitability. Seeking Alpha 1) Focus On Cost Discipline However, I continue to strongly believe that investing in META stock is a generational buying opportunity, and in this article, I discuss 3 key arguments why the world's leading social media conglomerate may have found a bottom: 1) focus on cost discipline, 2) progress with AI and Reels, and 3) monetization of WhatsApp & Messenger.įor reference, Meta stock is down approximately 66% YTD, versus a loss of only 21% for the S&P 500 ( SPY). I have voiced a bullish opinion on Meta Platforms ( NASDAQ: META) at $165, $127, and $97 per share, with only the last recommendation being in the money - apologies.
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