The last thing investors have been rewarding for the earnings season is a bottom-line miss compared to expectations of any magnitude.
After a whopper of an earnings shortfall, the Meta META Shares of the social media giant exploded nearly 20% in pre-market trading on Thursday. The most visited ticker page on Yahoo Finance was the company.
Here is how Meta performed compared to Wall Street estimates — at first blush it was far from rosy and deserving of a major push higher in the company's market cap.
The ability to print money has long been a favorite of investors but in the year 2022 the name soured due to slow sales and new restructuring efforts. They may be willing to overlook the shortfalls that see revenue weakness and ballooning Reality Labs losses on signs of better profits ahead.
Two areas may help you make a better profit trajectory - both of which Metaexecs played up on their earnings call late Wednesday shocker! A new appreciation of running the business with a focus on productivity is a first.
In November of last year, Meta lost 11,000 employees and 13% of its workforce due to pressure from large investors to shore up margins. Some of the cuts go as deep as canning cafeteria workers see in the tweet below, CEO Mark Zuckerberg says the company is just beginning its cost-cutting journey, much to the delight of Meta bulls.
Zuckerberg told analysts on the call that this was the beginning of our focus on efficiency and not the end of the year when we closed last year with some difficult layoffs and restructuring some teams.
Zuckerberg said that efficiency was one of his key themes for 2023, along with the fresh AI movement. When did he put efficiency ahead of innovation? The Street doesn't like it.
The company slashed its expense and capex guidance for the year by $5 billion and $4 billion.
The tone change from Zuckerberg was not overlooked on Wall Street, which has been itching to reengage with the stock from a long perspective.
The reduction in the expense guide was expected, but the magnitude of the change was a positive surprise, Jefferies analyst and Meta bull Brent Thill wrote in a client note.
A material raise to the company's stock buyback could boost the company's profits while Meta's profits got a jolt from cost-cutting. Shares outstanding are reduced, which helps to boost earnings per share.
Thill said that the share repurchase authorization provides additional EPS support, because of the $40 billion increase in the share repurchase authorization.
We don't think other companies should go down the route of Meta and miss earnings estimates. If you can come to the table right now with success on the cost-cutting front and promises of more ahead and have the money to toss at buybacks, a Meta-like reaction may occur, even if profits come in light.
This game isn't for everyone.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. You can follow Sozzi on Twitter and LinkedIn.