CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Scan to Download iOS&Android APP

Meta Platforms stock price: Will META shares bounce back after Facebook parent starts cost cuts?

By Jenny McCall

11:29, 30 September 2022

Share this article
In this article:
GOOG
Google
101.76 USD
5.51 +5.800%
META
Meta Platforms Inc.
118.16 USD
8.66 +7.950%

Subscribe to Weekly Highlights

The major market events for the week ahead right in your inbox. Subscribe
A image of the Meta CEO, Mark Zuckerberg.
Meta (FB) shares are in the hot seat right now, as the technology group saw its stock price slump more than 3% on Thursday - Photo: Getty Images.

Meta (FB) shares are in the hot seat right now, as the technology group saw its stock price slump more than 3% on Thursday, after it announced, it was to embark on cost-cutting measures. Could these cost cutting measures help the share price bounce back?

Meta (FB), which owns the social media site Facebook, as well as Instagram and messaging service WhatsApp, has seen its stock price decline by 59% this year.

What is your sentiment on META?

118.16
Bullish
or
Bearish
Vote to see Traders sentiment!

Meta (FB) share price chart

Hiring freeze and team restructuring 

CEO, Mark Zuckerberg, announced that the company will put a freeze on hiring and restructure some teams, during a weekly Q&A session with staff, according to an employee who had attended the sessions.

“I had hoped the economy would have more clearly stabilized by now, but from what we’re seeing it doesn’t yet seem like it has, so we want to plan somewhat conservatively,” Zuckerberg said.

Meta (FB) plans to reduce its budgets across most teams and individual teams will manage their own headcount changes, this could mean not filling roles as employees leave or moving people to other teams, according to a report in Bloomberg.

In July, Meta (FB) released its second-quarter earnings and its CFO, David Wehner said: “We expect 2022 total expenses to be in the range of $85-88bn, lowered from our prior outlook of $87-92bn. We have reduced our hiring and overall expense growth plans this year to account for the more challenging operating environment while continuing to direct resources toward our company priorities.”

“We expect 2022 capital expenditures, including principal payments on finance leases, to be in the range of $30-34bn, narrowed from our prior range of $29-34bn.”

 

Poor earnings 

Its second-quarter earnings saw Meta (FB) report a drop in sales and revenue.

UN01

4.52 Price
-9.400% 1D Chg, %
Long position overnight fee -0.0242%
Short position overnight fee -0.0203%
Overnight fee time 22:00 (UTC)
Spread 0.110

AAPL

147.94 Price
+4.400% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.07

TSLA

194.70 Price
+7.150% 1D Chg, %
Long position overnight fee -0.0308%
Short position overnight fee -0.0137%
Overnight fee time 22:00 (UTC)
Spread 0.12

NVDA

169.32 Price
+7.620% 1D Chg, %
Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 22:00 (UTC)
Spread 0.13

AJ Bell Investment Director Russ Mould wrote in a note about the group's second-quarter earnings release: Through Facebook, WhatsApp and Instagram, Meta’s business model was perfectly adapted to helping people cope with the isolation of the pandemic and lockdowns, but management seems to have assumed that the good times would roll for ever.”

Meta’s first-quarter earnings stated its plan to cut back, as the group said that its annual expenses would be approximately $3bn (£2.7bn) lower than initially projected, the initial estimate was around $95bn.

The company hasn’t announced whether it would make any layoffs but, like its fellow tech giant Alphabet (GOOG), has leaned more on hiring freezes. This month it was reported in Bloomberg that Alphabet, parent of search engine site Google, has also required some employees to apply for new jobs to stay at the company.

“Meta (FB) is responding to this profit and share price mauling. It is reining in hiring plans and trimming back operating expense budgets by around 5%, based on the mid-point of management guidance, for 2022. Additions to office space at Astor Place and Hudson Yards in Manhattan are reportedly on hold,” Mould said.

“That sort of activity – or lack of it – will make economists and central bankers shudder. If even the largest, well-resourced, highly profitable firms are cutting back, it does make you wonder what smaller companies who are even more susceptible to a profit squeeze will be thinking and doing.”

Alphabet (GOOG) share price chart

So, will these cost cuts aid Meta’s plan towards a stock price rebound? Only time will tell, but analysts are less than optimistic.

“A first-ever year-on-year drop in sales, a third consecutive year-on-year drop in profits and forecasts from management which suggest there may be worse to come all leave Meta Platforms (FB) struggling to stem a year-long share price slide,” Mould said.

“A weakening advertising market, loss of share to Google and TikTok and ongoing regulatory pressure are all putting on the squeeze and Meta (FB) is responding by cutting back on hiring and spending plans – just the sort of stuff upon which economic slowdowns or even recessions are made,” Mould concluded.

Related reading

Rate this article

Share this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Latest Stocks news

Still looking for a broker you can trust?

Join the 475.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading