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Meta stocks up as Wall Street rallies on layoffs

Mark Zuckerberg, CEO of Meta Platforms Inc., speaks during the Meta Connect virtual event in New York, U.S. on Tuesday, October 11, 2022. For a Virtual Future.

Michael Nagle | Bloomberg | Getty Images

Shares of Meta jumped more than 7% on Wednesday after the company announced it will dismiss more than 11,000 employees.

The analysts of UBS were encouraged by Meta’s announcement on Wednesday and said they believed the layoffs were a clear sign the company “gets it.” Analysts reiterated their buy rating on Meta shares and said they liked Zuckerberg’s comment about becoming “more capital efficient” in his memo to employees.

“We believe the Meta cost reductions — through opex and capex — indicate the company is hearing investors, and we believe stocks may rise,” they wrote in a Wednesday note.

Investors worried about rising costs and expenses for Meta, which jumped 19% year-over-year in the third quarter to $22.1 billion. The company provided lukewarm tips in late October for its upcoming fourth-quarter results that spooked investors and sent its shares plummeting nearly 20%.

Meta’s stock has lost more than 71% of its value so far this year and the company has become the worst performer in the S&P 500 last week.

RBC Capital Markets analysts said the layoffs don’t solve the many challenges Meta faces, but “management’s first olive branch is at least a start.”

They maintained their outperformance rating on Meta.

“While this announcement does nothing to allay concerns about competition, loss of signal and the perception of overinvestment in the Metaverse – it is the first sign that the CEO has shown he is ready to acquiesce. to shareholders’ desire to invest a little more wisely given the various headwinds facing the company,” RBC analysts wrote in a note Wednesday.

The analysts of JP Morgan said they viewed Meta’s workforce reductions favorably and that the layoffs could theoretically cut about $8 billion in costs to the company on an annual basis.

“While we had hoped the 2023 spending outlook would decline further, the overall headcount reduction is likely larger than most expected and shows that management is operating with increased discipline, particularly after a difficult period of almost 2 weeks since the publication of the results of the 3rd quarter.”

— CNBC’s Michael Bloom and Jonathan Vanian contributed to this report.