Mark Zuckerberg's Remarkable Triumphs in 2023
2023 has proven to be a remarkable year of achievements for Meta (formerly Facebook) With a federal jury ruling against Google's app store for antitrust violations and Macys experiencing a surge in shares due to a buyout offer, Meta has seen an exceptional year of progress and success
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Meta (previously Facebook) has experienced a successful "year of efficiency."
Following a tumultuous 2022 that resulted in a $600 billion drop in market value and a 65% decline in stock, Meta has experienced a significant resurgence. The company's shares have surged by over 170% this year, instilling optimism among investors that even better days are ahead.
It's not just Wall Street that's feeling the positive effects, as CEO Mark Zuckerberg, who faced criticism in 2021 and 2022 for shifting the company's focus towards the metaverse, is also reaping the benefits of this turnaround. With the stock's remarkable growth, Zuckerberg, his trust, charities, and political entities recently sold shares of Meta for approximately $185 million, marking their first cash-out in two years, according to regulatory filings.
What's different now?
In a year focused on efficiency, Meta has chosen to prioritize austerity over investing in the futuristic metaverse, and Wall Street has responded by rewarding the company with significant approval.
The company has let go of over 20,000 employees in four rounds of layoffs starting at the end of last year.
Meta has stated that the layoffs were aimed at improving efficiency as the company works to bounce back from ongoing revenue declines, increased competition, worries about user growth, and significant losses in its Reality Labs division. Zuckerberg also acknowledged that the company had hired too many employees during the early stages of the pandemic, when there was high demand for its products and online advertising, but demand decreased once the world reopened.
The company prioritized stabilizing its cash flow this year to ensure its financial health. This involved reducing the number of AI projects, resulting in a cash flow of $173 million last fall. However, the company has since seen a significant improvement, with its cash flow increasing to $13.64 billion as of last quarter. Additionally, Meta's shareholders can also be pleased with the company's share repurchases of about $3.7 billion in the third quarter alone.
An encouraging economic trend: While Meta was cutting costs, it also benefited from a resurgence in the advertising industry as companies became more optimistic about the American economy. With the Federal Reserve halting rate hikes and continued consumer spending, ad revenue saw a significant rebound for Meta after a sharp decline in 2022. In fact, ad views increased by 31% in the third quarter compared to the previous year, although the average price per ad did decrease by 6%, marking the slowest decline in nearly two years.
The company has achieved success in acquiring new users, generating revenue from its reels feature on Instagram, and effectively introducing Threads, designed to rival Elon Musk's X. Threads is set to debut in the EU next week.
Looking ahead, the big question is whether Meta can maintain its strong performance on Wall Street once its period of cost-cutting comes to an end.
During the third quarter earnings this fall, Zuckerberg announced that the company will be spending more next year than what Wall Street analysts had predicted, by hiring more employees and focusing on expanding into AI. Additionally, the company cautioned that the ongoing conflict in Israel and Gaza may negatively impact fourth-quarter sales.
Furthermore, momentum seems to be waning as the stock has decreased by about 1.2% in the last month, despite the rest of the market experiencing steady growth.
Not all analysts believe that Meta's bull run has come to an end. Bank of America still maintains a "buy" rating for the stock, with analyst Jason Post expressing confidence in the potential for AI-driven innovation at Meta to bring about new user experiences and recurring revenue models. Post also believes that Meta's AI assets are undervalued in the stock price.
Zuckerberg's remarks about expanding hiring in 2024 may have caused some concern about rising costs, but as KeyBanc analyst Justin Patterson noted, the message is clear: Meta intends to continue growing at a more sustainable pace. As a result, both analysts have raised their price targets for Meta stock in the coming year.
Federal jury says Googles app store violated antitrust law
A landmark ruling was made that could potentially weaken Google's strong grip on its Android app store, as a federal jury declared on Monday evening that Google's app marketplace is an unlawful monopoly, according to my colleague Brian Fung.
The outcome of a lengthy legal dispute between Epic Games, creator of the popular video game "Fortnite," and the tech giant represents a major win for those critical of Google's app store policies. The jury determined that Google's app store practices are in violation of US antitrust law and that the company has been unlawfully operating a monopoly in its distribution and pricing of Android apps.
For weeks, Epic and Google engaged in a highly publicized federal trial, covering topics such as the fees Google imposes on in-app purchases and the contractual terms that prevent competing app stores from being available on Android devices.
The jury's decision may signal a weakness in the stronghold that app store operators have maintained against allegations of monopoly practices by consumers, app developers, and other critics of major technology firms.
"Triumph over Google!" declared Epic Games CEO Tim Sweeney in a social media post. "Following four weeks of thorough court hearings, the California jury ruled against the Google Play monopoly on every charge."
Google has stated that it will contest the significant ruling that has the potential to bring about major changes to its app store business. According to Wilson White, the vice president of government affairs and public policy at Google, "Android and Google Play offer more options and transparency than any other leading mobile platform." He also emphasized that the company fiercely competes with Apple and its App Store, as well as other app stores on Android devices and gaming consoles. White assured that Google will persist in defending the Android business model and is unwavering in its dedication to users, partners, and the larger Android ecosystem.
Macys shares soar on report of buyout offer
Macys' shares surged by over 17% at the start of the week following a report by the Wall Street Journal suggesting that the well-known 165-year-old retailer, often linked with the holiday season, could be the target of a potential buyout, as reported by my colleagues Chris Isidore and Nathaniel Meyersohn.
The report stated that Arkhouse Management, a real estate-focused investment firm, and Brigade Capital Management, a global asset manager, have made an offer to pay shareholders a 32% premium above the stock's closing price on Friday. The report also mentioned that the bidders had discussed the proposal with Macy's. It is currently unknown how the retailer views the proposal, as spokespeople for Macy's and Arkhouse declined to comment on the report. Brigade has not responded to a request for comment.
Macys operates 722 store locations in 43 states, Washington, DC; Puerto Rico and Guam. It includes approximately 500 Macys branded stores, 55 upscale Bloomingdales stores, and 160 Bluemercury beauty and skin-care chain locations. The acquisition of Bluemercury took place in 2015.
