In a groundbreaking move that has sent shockwaves through the stock market, Meta, the parent company of Facebook, added over $200 billion in stock market value on Friday. The surge in its share price marked the biggest one-day percentage jump in a year after the company’s first-ever dividend declaration and impressive financial results.
Days before Facebook’s 20th-anniversary milestone, Meta (META.O) announced an additional $50 billion in authorized share repurchases. Simultaneously, the company declared a quarterly dividend of 50 cents per share. The bold decision to issue dividends makes Meta the first of its generation of internet giants to take this step. The move places Meta as the fourth among the “Magnificent Seven” stocks, with its dividend yield of 0.5% matching that of Apple (AAPL.O), according to data from the London Stock Exchange Group (LSEG).
Meta’s stock experienced an extraordinary surge, reaching as high as 21.7%, showcasing the positive market response to the company’s strategic financial decisions. Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, commented on the move, stating, “The returning of cash to shareholders is a bold and well-regarded move. The amount of free cash pumping through the business means it is more than able to afford it, and it helps pay investors for their patience.”
One notable beneficiary of Meta’s dividend plan is CEO Mark Zuckerberg, who owns approximately 350 million Meta Class A and Class B shares. With a quarterly payout of around $175 million, this move underscores the company’s commitment to rewarding its shareholders.
Strategically timed amidst the Federal Reserve’s rate cuts, Thomas Monteiro, analyst at Investing.com, praised Meta’s approach, stating, “Meta’s strategy of announcing buybacks and dividends right before the Fed begins to cut rates is a brilliant move. As the battle for innovation grows in the Big Tech space, investors will see any extra capital as dry powder for future earnings growth.”
The positive momentum for Meta continued as the company reported strong ad sales and a rebound in user growth during its fourth-quarter results. The revenue surged by an impressive 25%, surpassing analysts’ estimates for the current quarter. Notably, Meta’s net income tripled to $14.02 billion, fueled by a combination of robust revenue and an 8% reduction in costs and expenses following substantial job cuts since late 2022.
Jasmine Enberg, principal analyst at Insider Intelligence, praised Meta’s efficiency measures, saying, “The ‘Year of Efficiency’ has paid off, with both headcount and costs dropping, and Meta exceeding our expectations for full-year 2023 ad revenue.”
While Meta has invested billions in enhancing its computing capacity for generative AI products and hardware devices, its shares are currently trading at 21 times expected earnings. This compares favorably to other social media rivals such as Snap (SNAP.N) with a forward PE of 84, Alphabet (GOOGL.O) at 20, Amazon.com (AMZN.O) at 41, Microsoft (MSFT.O) at 32, and Apple at 27.36, positioning Meta as a strong contender in the dynamic landscape of Big Tech.