Mass layoffs at Meta: Is Facebook’s ‘absolute monarch’ Mark Zuckerberg finally listening?
Facebook-owner Meta did not do well with investors during and after the latest earnings releases.
Large institutional investors concluded that founder Mark Zuckerberg is not listening to investor concerns over capital expenditure plans for next year and ballooning operating expenses.
But the Wall Street Journal is writing that Meta is now planning a large layoff to regain credibility with investors, sending shares up.
“Institutional investors were disappointed by Meta’s earnings but even more disappointed during the investor talks after the Q3 release as the key takeaway was that CEO Mark Zuckerberg is acting like an absolute monarch, listening to no one,” according to Peter Garnry, Head of Equity Strategy at Saxo Bank.
As result Meta’s slide continued last week below $100 and ending just above $90 on Friday.
Thousands may be sacked
Meta is reportedly planning to lay off thousands of employees to send the signal to investors that it is serious about preserving profitability while maintaining its aggressive bet on the metaverse.
Investors are reacting to this unconfirmed news sending the shares higher in pre-market trading.
“Zuckerberg is clearly getting to the conclusion that something has to happen with Meta’s share price down 76 per cent from the peak and the 12-month P/E ratio plunging to around 10 which 40 per cent below the S&P 500,” Garnry said.
“If Meta can prove that it can stabilize operating income through layoffs while maintaining growth in its core business and show more promising progress on its metaverse bet, then the P/E ratio could recover back to the S&P 500 average,” he added.
“In this event, the stock has a 60 per cent gain potential, but such a move is not risk-free for investors,” Garnry continued.
He stressed that “the key risks” for Meta is the competition from TikTok, lack of monetization of WhatsApp, higher energy costs running datacenters, cash compensation pressures due to employee stock options losing value, and institutional investors continuing selling their shares.