As Metaplatforms (NASDAQ:META) “Year of Efficiency” is coming to an end, the technology company and its shares appear stronger than ever. META stock has gained 154% for the year, making it a top performer among technology stocks and a major contributor to the Nasdaq index’s 36% rise in 2023.
Last year’s sharp rise represents a significant turnaround for Meta Platforms, whose shares fell 53% during the 2022 bear market and analysts and investors questioned its plans to build a virtual world called “Metaverse.” Now, as 2024 approaches, the company and its shareholders appear well-positioned for further growth.
META shares and the year of efficiency
Meta Platforms began 2023 by announcing its plans for a year of efficiency. The company had to cut Metaverse spending and focus on AI projects. To better manage costs, Meta also had to lay off thousands of employees as Facebook parent company responded to Wall Street concerns about its spending and strategic direction.
Through job cuts, Meta reduced its global workforce by over 15%. The company also cut its total spending in 2023 to $89 billion from a planned $100 billion and said its board had approved a $40 billion increase in its stock repurchase plan.
In 2022, the company repurchased $27.9 billion of its own shares. Meta’s spending rose 22% to $25.8 billion in 2022, causing concern on Wall Street.
The reduced spending, workforce cuts, and focus on shareholder returns were exactly what analysts and investors expected from Meta Platforms, and the company’s stock has risen steadily this year as a result.
AI leadership and products
Another big move from Meta Platforms this year that has won over investors and analysts was the company’s decision to refocus its efforts on AI and jump into the technology with both feet.
The company did just that, announcing a new AI-powered virtual reality headset and several AI applications at its recent developer conference earlier this fall. Notably, Meta has introduced several generative AI chatbots that look intriguing.
Meta’s text-to-image platform Emu will be integrated into the Messenger app, along with AI photo editing tools for Instagram.
In addition, Meta has announced that it will produce its own custom microchips for its AI and video processing platforms and has partnered with this company IBM (NYSE:IBM) to create a group of more than 50 other companies, research groups and scientists called the “AI Alliance” that will focus on promoting responsible AI projects.
The aggressive shift to AI has caught the attention of investors and analysts, who see Meta Platforms as a major player in the space and likely to benefit from AI advances in the coming years.
growth and problems
All the changes made this year are paying off for META shares. The company has posted a series of solid financial results throughout the year, and its most recent third-quarter report was no exception.
Meta reported a 23% increase in third-quarter revenue as the market for online advertising on its social media sites recovers following the pandemic. In fact, third-quarter sales grew at their fastest pace in two years, driving META stock higher. Earnings per share of $4.39 beat Wall Street’s expected $3.63.
Despite the strong results, Meta is not without its problems. The recent news that Meta CEO Mark Zuckerberg sold $190 million worth of META shares in November this year was the first sale of company shares in two years, which attracted a lot of attention.
Additionally, the company is battling a lawsuit from 41 states whose attorneys general accuse the company of intentionally addicting children to its social media platforms, which include Instagram, and knowingly hiding the harms found online.
Although the lawsuit is not insignificant, it will be resolved in a timely manner and is not expected to pose any short-term risks to Meta’s business or performance. When it comes to selling shares, almost all executives sell some of the shares they hold in a company from time to time. These sales are often planned well in advance and are not an indication of problems or a lack of confidence in the business they are running.
META stock is a buy
As 2023 comes to a close, Meta Platforms appears to have righted its ship and positioned its company for future success. The company has reduced costs, become a major player in the red-hot AI space, and continues to experience impressive growth across its various businesses. While there are some headwinds, they do not appear to be insurmountable and should not hinder the company’s long-term growth trajectory. Heading into 2024, META stock is a buy.
At the time of publication, Joel Baglole did not hold, directly or indirectly, any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publication policies.