Cramer: Meta layoffs show Mark Zuckerberg ‘has religion’ on costs, but it should be reduced further.

The announcement by Club Holding Meta Platforms (META) on Wednesday that it would lay off about 13% of its workforce, or more than 11,000 employees, is a sign that CEO Mark Zuckerberg “has a religion”, according to Jim Cramer. When trying to deal with the company’s out-of-control expenses. We’re not happy to see people lose their jobs, but I’d like to point out that the severance package seems generous. And hopefully it can blunt the blow for the unfortunate people involved in these staff cuts. Meta surged about 8.5% in trading Wednesday on the news of the layoffs. However, after falling 24.5% since October 27 earnings, there is still room for improvement. Despite Wednesday’s gains, Meta’s stock is still down nearly 69% to date, making it one of S&P’s worst 2022 earnings. 500 companies. While layoffs are painful, especially in these economic conditions, I think the move was necessary after Facebook’s parent company reported disappointing third-quarter results and weak outlook last month. At the time, management directed cost increases in the mid-teens, in direct contrast to investors’ desire to lower costs and see cost growth more in line with earnings expectations. Jim asked Meta and other tech companies to recognize the seriousness of the global macro headwind and cut costs. So we’re excited to see management finally showing signs of realizing the realities of our operating environment. In a letter to employees about the layoffs, Zuckerberg wrote that “we are taking a number of additional steps to make the company more agile and efficient by reducing discretionary spending and extending the employment freeze through the first quarter.” In a report from the Securities and Exchange Commission (SEC), Mehta quantified the effectiveness of layoffs. Currently, the team expects total costs in 2023 to range from $96 billion to $101 billion to $94 billion to $100 billion. Quarterly earnings release. The revised guidance reflects management’s “plan to add fewer employees in 2023 than previously anticipated because it will significantly slow the employment trajectory through early 2023”. Contributing to the reduced cost outlook, management now expects capital expenditures (capex) to range between $34 billion and $37 billion. However, executives’ expectations remain unchanged, especially for Reality Labs’ losses “to be significantly higher year-over-year.” Reality Labs is the virtual reality and metaverse division of the company. As a cascading effect, this capex reduction in Meta could cause some pressure we are seeing in semiconductor stocks, an area that has been bid on according to Meta’s initial cost guide. However, as mentioned in Wednesday’s “Morning Meeting”, we do not intend to reduce our semiconductor positions based on this news. Members can review the dynamics of cloud and data center spending and semiconductor company sales in our guide to the chip industry and how it works. Meta layoffs have started, but looking at last year alone, I think we may need more people. As of the third quarter, the company had added approximately 19,000 people to its headcount. Before the third-quarter launch, Meta’s long-term shareholder Brad Gerstner of Altimeter Capital Management doubled its free cash flow to $40 billion per year and said, “The company’s team and investments.” In an open letter to management on October 24, Gerstner called for a number of actions to be taken. Minimum 20% staff reduction; Effectively fire all employees hired last year. Instead of a capex reduction of at least $5 billion per year, management has guided a capex reduction of $2 billion in 2023 from the upper limit of the previous range, as noted in more detail earlier. Limit metaverse-oriented investments to “no more than $5 billion per year”. If you look at these phases that have been well-received on Wall Street, it’s no exaggeration to say that Wednesday’s news is just the beginning. It’s just the beginning. About 6,000 additional layoffs are required to achieve Phase 1. For other costs, the decline in advanced capex is welcome, but we’re clearly not close to the $25 billion investors want to see, and management has no intention of slowing down their investment in the Reality Labs sector. Let’s take a look at Wall Street’s reaction to the news. “We expected the cost outlook for 2023 to be lower, but overall the cuts are likely to be bigger than most people expected,” said JPMorgan analysts. It shows that it is operating. Third-quarter earnings” In their view, the move could “theoretically eliminate $8 billion in annual costs.” “Meta cost savings across opex are [operating expenditures] and capex — the company listens to investors and thinks the share price can rise further.” Their estimates suggest that a $2 billion reduction in operating costs could add about 60 cents to 2023 earnings-per-share and ultimately cost more. At RBC, analysts see a high probability of lowering their cost guidance throughout the year, noting that the realized operating costs in 2022 are likely to be about 10% lower than in 2022. In 2022, the total cost was expected to be in the range of $91 billion to $97 billion, but now it is projected that the total cost will be in the range of $85 billion to $87 billion in 2022. Ultimately, however, they believe that “this announcement is a competitive, signal While doing nothing to alleviate perceptions of losses and excessive metaverse investments, CEO h Canacord Genuity analysts said, “We believe this announcement will have a positive impact on stocks, especially given the ongoing macro situation.” Uncertainty and the overall slowdown in digital advertising are because these declines will help better align Meta’s cost structure with its current growth trajectory, appeal to current investor sentiment and increase overall operational efficiencies.” is clearly positive and should be raising our estimates, but more will be needed to see continued gains, as a result we see Wednesday’s update consolidating the stock’s bottom and causing investors to be more constructive about the stock. However, we don’t think it justifies further exposure to the name, as there are better areas where better funds can be put where their fundamentals are more consistent with the macroeconomic environment. last month, it has downgraded its Meta stock to a rating of 2 and is sticking to lowering its target price to $150 per share from $235. Finally, Meta’s announcement is consistent with industry-wide observations and is slowing the economy to reduce inflation. I’d like to admit that it will help the Fed achieve its goal of keeping the cost under control (in that regard, the government’s CPI released on Thursday will be most important). Let’s take a quick look at what they’re doing: Salesforce (CRM) confirmed it had laid off less than 1,000 people on Monday, and the report estimates the decline will more than double: Qualcomm (QCOM) CEO Cristiano Amon said chipmakers hired last week. Amazon (AMZN) extended its hiring freeze to its entire corporate workforce this week. Now that Covid is less of a problem, Amazon is scaling up early in the pandemic to meet huge demand. Alphabet (GOOGL) announced in its forward guidance last month that it was He said he expects the number of workers to slow to less than half of the 12,765 employed in the third quarter. Management’s actions to slow the pace of hiring will become clearer next year. (Jim Cramer’s charitable trusts are long META, CRM, AMZN, QCOM, and GOOGL. See the full stock list here.) Join the CNBC Investing Club with Jim Cramer to receive trade alerts before Jim starts trading. It’s possible. deal. Jim waits 45 minutes after sending a trade notification before buying or selling any stock in the charity trust’s portfolio. If Jim was talking about stocks on CNBC TV, he would wait 72 hours after issuing a trade alert before executing a trade. The Investment Club information above is subject to our Terms of Use and Privacy Policy, along with our disclaimer. By receiving the information you provide in relation to the Investment Club, no fiduciary duties or obligations exist or are created. No specific results or profits are guaranteed. Mark Zuckerberg, CEO of Meta Platforms Inc., will speak at the virtual Meta Connect event in New York, USA on Tuesday, October 11, 2022. Michael Nagle | Bloomberg | Getty Images Club Holding Meta Platforms (META) announced on Wednesday that it would deploy about 13% of its total workforce, or more than 11,000 people, a sign that CEO Mark Zuckerberg had “got religion”, according to Jim Cramer. “When trying to deal with the company’s out-of-control costs. We don’t like people losing their jobs, but I’d like to point out that the severance package looks generous. And it’s going to blunt the blow for the unfortunate people involved in these cuts. I hope you can.
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