Meta shares jump after first-ever dividend plan, 'Year of Efficiency'
pays off
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[February 02, 2024] (Reuters)
- Meta surged 17% in premarket trading on Friday as the Facebook
parent's first dividend declaration and robust results increased
expectations of strong returns from its investments in "metaverse"
technologies and artificial intelligence infrastructure.
Days ahead of Facebook's 20th anniversary, Meta authorized an additional
$50 billion in share repurchases and said its quarterly dividend would
be 50 cents per share.
The dividend would not change the total amount of capital returned and
introducing a dividend gives the company more "flexibility," Meta CFO
Susan Li said.
The new dividend plan would also mean 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.
"The returning of cash to shareholders is a bold and well-regarded move.
The amount of free cash pumping through the business means it is more
than able to afford it, and it helps pay investors for their patience,"
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said.
Meta on Thursday flagged strong ad sales and a rebound in user growth
during its fourth-quarter results, while the social media giant also
forecast current-quarter revenue above analysts' estimates.
The company has been working at keeping costs low during the last year,
and let go of more than 21,000 employees since late 2022, with
Zuckerberg calling 2023 the "Year of Efficiency".
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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
"We are impressed with strong results/guidance and overall
resiliency of Meta's advertising platform given macro wobbles,
although this reflects the meaningful investments in platform
engineering and product development," Baird analyst Colin Sebastian
said.
The world's biggest social media company 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.
Meta's shares trade at 21.29 times expected earnings, compared with
a forward PE of 83.85 for social media rival Snap, 20.38 for
Alphabet, 40.51 for Amazon.com and 31.57 for Microsoft, according to
LSEG data.
Meta is the fourth from the so-called "Magnificent Seven" stocks to
pay a dividend, with its yield of 0.51% matching that of Apple.
Meta was on track to gain $171 billion in market value, based on a
premarket share price of $461.30, if gains hold.
"The 'Year of Efficiency' has paid off, with both headcount and
costs dropping, and Meta exceeding our expectations for full-year
2023 ad revenue," Jasmine Enberg, principal analyst at Insider
Intelligence, said.
(Reporting by Aishwarya Venugopal and Samrhitha Arunasalam in
Bengaluru; Additional reporting by Medha Singh; Editing by Shounak
Dasgupta)
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