Meta’s stock just wrapped up its ninth straight monthly gain as Wall Street cheers cost cuts

A yr in the past, Meta’s inventory was within the midst of a nosedive as Wall Street grew involved that threats to the business had been more and more existential.

But after Mark Zuckerberg’s firm, previously often called Facebook, reported better-than-expected second-quarter outcomes final week and issued optimistic steerage, Meta shares jumped to their highest since early 2022.

Despite slipping on Monday, Meta’s inventory climbed 11% in July, wrapping up its ninth straight month of positive factors, by far the longest such stretch since Facebook’s IPO in 2012. The inventory is now inside 17% of its document excessive from September 2021.

Driving the dramatic rebound is a collection of cost-slashing measures Meta carried out in late 2022 and early 2023 leading to about 21,000 job cuts, and a restoration in Facebook’s on-line advert business, which is lastly again to double-digit progress after Apple’s iOS privateness change and a sputtering economic system led to a few straight quarterly gross sales declines. Meta’s investments in synthetic intelligence are additionally paying off, extra individuals are watching short-videos on the corporate’s TikTok-like Reels product, and the current debut and early adoption of the Twitter rival known as Threads has given traders hope that Meta can finally flip the messaging app into a significant hit.

Zuckerberg stated on final week’s earnings name that he is “quite optimistic” about Threads and its trajectory, noting that the product “was built by a relatively small team on a tight timeline.” He added that Threads “really blew up and created a big opportunity immediately,” however went on to recommend that the corporate is nowhere near making an attempt to monetize the app.

“With easing comps, continued AI-driven improvements to targeting capabilities, and several exciting nascent products and monetization initiatives, we think the ongoing Meta turnaround has a long runway ahead,” wrote analysts at Canaccord Genuity in a notice after Meta’s earnings report. They have a purchase ranking on the inventory.

Meta has been the second-best performing inventory within the S&P 500 this yr, behind solely Nvidia. Last yr it was one of many worst performers within the index, dropping two-thirds of its worth.

Kicking off the downward spiral had been the beautiful revelations in late 2021 from former Facebook worker turned whistleblower Frances Haugen. Haugen’s leaking of hundreds of pages of inner paperwork confirmed that Facebook had failed to handle numerous issues affecting its household of apps, similar to Instagram’s contribution to the psychological well being problems with youngsters.

The public outrage over the revelations put Zuckerberg as soon as once more within the crosshairs of lawmakers, additional damaging Facebook’s fame after years of issues with how the platform dealt with misinformation.

As Facebook shares started their descent, Zuckerberg renamed his firm to Meta, and advised traders of his plan to spend billions of {dollars} 1 / 4 creating the digital and augmented actuality applied sciences wanted to carry the so-called metaverse to life within the distant future.

The largest drawback was Apple. Although Zuckerberg and different firm executives had warned that the iOS privateness replace would damage Facebook’s capability to successfully goal advertisements, traders solely digested the fact of the state of affairs as earnings experiences got here up brief.

The firm additionally felt the repercussions of the warfare in Ukraine and Russia’s blacklisting of Facebook and Instagram within the nation. While Russia solely represented about 1.5% of general gross sales, Meta wanted all of the income it may drum up with advertisers pausing spending due to the shaky economic system and competitors selecting up from rival TikTok.

Meanwhile, Wall Street was rising more and more involved concerning the firm’s profligate spending on the metaverse.

Then got here the associated fee cuts and Zuckerberg’s promise early this yr that 2023 can be the “year of efficiency.”

Zuckerberg beforehand advised staff that Meta was “taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”

“I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted.” Zuckerberg wrote in November of final yr.

Under Meta’s cost-cutting plans, Zuckerberg stated this yr that the corporate would take away layers of center administration that he believed was slowing down vital selections and the corporate can be “proactive on cutting projects that aren’t performing or may no longer be crucial.”

The financials began wanting higher within the first quarter, as gross sales grew 3% from the prior yr. Much of the bounce was coming from China, the place a nationwide easing of robust Covid insurance policies led to a growth of Chinese corporations spending closely on Facebook and Instagram advertisements to focus on customers worldwide.

Meta executives pointed to a number of constructive indicators that its business was on the mend. More corporations, significantly retailers, had been spending cash on Meta’s AI-powered Advantage Plus service, serving to restore the effectiveness of its internet marketing system.

The firm touted the growing use of its short-video Reels service. Reels continues to develop whereas TikTok’s future within the U.S. stays unsure as lawmakers scrutinize the app, which is owned by China’s ByteDance, for alleged nationwide safety points.

Even because the inventory pushes larger, loads of issues stay about the way forward for Meta.

The firm’s Reality Labs unit, house to its metaverse investments, misplaced $13.72 billion final yr and one other $3.7 billion within the first quarter of this yr, all whereas gross sales stay miniscule. Apple has lately jumped into the VR market with guarantees of a brand new headset. On the advert facet, Amazon’s business continues to ramp up, and TikTok may nonetheless be a risk if it could actually escape regulatory woes.

Governments all over the world are nonetheless scrutinizing Meta over knowledge privateness and associated points. Meta CFO Susan Li stated final week that there are “broadly speaking, increasing legal and regulatory headwinds in the EU and the US that could significantly impact our business and our financial results.”

But in the intervening time Meta traders are celebrating, and the image is clearly a lot brighter than it was 12 months in the past.

WATCH: Reels, advertisements and cost-cutting increase Meta inventory to 17-month excessive