Meta stock surges after earnings as ‘year of efficiency’ pays off

Meta shares surged more than 4% on Tuesday, and were trading at their highest level since Jan. 2022, a day after the company posted stronger-than-expected results for the second quarter and gave guidance for the current period that topped analysts’ estimates.

The company on Wednesday reported earnings per share of $2.98, which was higher than the $2.91 per share expected by a survey of Refinitiv analysts. Revenue jumped 11% year over year to $32 billion, surpassing the $31.12 billion average analyst estimate, according to Refinitiv.

For the third quarter, the Facebook parent company forecast revenue of $32 billion to $34.5 billion. That’s above the $31.3 billion that analysts were expecting.

The results reflect a rebound in online advertising, as well as signs that Meta CEO Mark Zuckerberg’s “year of efficiency,” or focus on cutting costs and improving profitability, is paying off.

“While there were some mixed narratives (both qualitative and quantitative) around opex/capex in 2023/2024, our view is that management’s ‘year of efficiency’ theme continues to drive a sustained mentality shift inside the company – while long-term investments behind key objectives remain a focus area (in terms of infrastructure & talent), we expect management to continue to balance driving growth and increased returns,” Goldman Sachs analyst Eric Sheridan, who maintains a buy rating on Meta shares, wrote in a Thursday note.

Other analysts cheered the results, pointing to strong engagement, rising monetization of its TikTok rival Reels, as well as return on investments in artificial intelligence, as bright spots in the report.

Bank of America analyst Justin Post upped his price target on Meta shares to $375 from $350 and reiterated his buy rating on the stock.

“Meta is hitting its stride again with a renovated tech stack and Reels strategy, gaining share in the industry,” Post wrote in a Thursday report.

Still, Post and other analysts expressed uncertainty around Meta’s investments in the metaverse, as signaled by growing losses in the company’s Reality Labs unit. The division posted an operating loss of $3.7 billion during the second quarter, and Meta warned that it expects Reality Labs’ operating losses to continue this year, as well as “increase meaningfully” in 2024.

CNBC’s Michael Bloom contributed to this report.

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