Home Business Meta achieves a historic milestone on Wall Street, gaining a market capitalization increase of $196 billion

Meta achieves a historic milestone on Wall Street, gaining a market capitalization increase of $196 billion

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Meta Surges: Record Stock Gain

Meta Platforms, the parent company of Facebook, experienced an unprecedented one-day gain of $196 billion in stock market value on February 2. This surge, fueled by Meta’s announcement of its first dividend and strong financial results, stands as the largest single-day increase in the history of Wall Street.

Just before Facebook’s 20th anniversary, Meta approved an extra $50 billion for share repurchases and introduced a quarterly dividend of 50 cents per share. Despite dividends being typical for mature companies, Meta joins Silicon Valley’s top tech giants—Apple, Microsoft, and Nvidia—as the fourth to embrace dividends.

In 2023, Meta cut its workforce by 22%, showing a dedication to implementing cost-cutting measures, according to report.

“The focus on efficiency throughout the year has yielded positive results, with Meta successfully reducing both headcount and costs. Additionally, the company has surpassed expectations for ad revenue in the full year 2023,” stated Jasmine Enberg, principal analyst at Insider Intelligence.

Pinnacle Peaks, Deepest Depths

In the session, Meta’s stock skyrocketed by 20.3%, marking its most significant single-day percentage increase in a year and the third-largest since its 2012 Wall Street debut. Consequently, Meta’s current market value has now exceeded $1.22 trillion.

Meta’s market cap increase exceeded the record set by Amazon, which saw a $190 billion surge on February 4, 2022, following an impressive quarterly report. Just a day prior, Meta incurred the largest loss in US stock market history, losing over $200 billion, attributed to a gloomy forecast.

“Paying a dividend indicates a desire to enhance the company’s image and gain more credibility. However, the amount offered is considered a symbolic gesture,” stated investment analyst Dan Coatsworth from AJ Bell.

“It can appeal to investors seeking dividends and a stable income,” added Brian Jacobsen, Chief Economist at Annex Wealth Management, in comments to the agency.

“Strong execution, accelerated growth, and improved capital structure efficiency boost the outlook ahead. Meta’s AI pipeline for users and advertisers is robust, with additional tools poised to launch and scale in 2024,” commented Brian Nowak, an analyst at Morgan Stanley, in a note on February 2.

CEO Compensation and What Lies Ahead

Meta’s dividend strategy means a significant payout for CEO Mark Zuckerberg, who holds about 350 million Meta Class A and Class B shares. This could translate to approximately $175 million for him every quarter. Fueled by a promising outlook for artificial intelligence (AI), Meta has surged by 35 percent in 2024, adding to a 24 percent S&P 500 rally last year.

Meta’s impressive fourth-quarter results were fueled by robust ad sales and a resurgence in user growth, resulting in a 25 percent increase in revenue. The company saw a threefold rise in net income to $14.02 billion, thanks to a significant 8 percent reduction in costs and expenses achieved through the elimination of over 21,000 jobs since late 2022.

Although Meta’s dividend yield is modest at around 0.4 percent, it might draw a wider investor base, especially those keen on dividend-paying stocks. This aligns with the trend in Exchange Traded Funds (ETFs) centered on US dividend payers, currently holding assets surpassing $400 billion, making up over 5 percent of the domestic ETF universe.

Over the past decade, Meta has poured billions into boosting its computing capacity for generative AI products integrated into Facebook, Instagram, WhatsApp, and hardware devices like its Ray-Ban smart glasses.

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