Meta Platforms (META) Stock Earnings and Forecast: Facebook parent rockets 20% afterhours

Well, well, well. It appears that Facebook and Instagram parent Meta Platforms (META) has duly mended its frayed relationship with Wall Street. Despite announcing a large-scale earnings miss late Wednesday, founder and CEO Mark Zuckerberg's Meta Platforms said it would cut expenses by an average of $3 billion in 2023 and introduced a new $40 billion buyback program that ignited the META share price afterhours.

META stock already had advanced 2.8% in Wednesday's proper session on account of Federal Reserve Chair Jerome Powell's admission that his rate hikes were indeed working to bring down inflation. Once the buybacks were announced though, META stock shot up 20.2% to a hair shy of $184.

Meta Platforms stock earnings: $40 billion buyback is an olive leaf to Wall Street

This was META stock's largest gain in a long time. It is akin to the 19.6% sell-off on October 26 of last year. The afterhours high places META at the resistance level not seen since July 2022. From the 52-week low seen in early November just three months ago, META stock has now returned 109%. 

To put the $40 billion repurchase plan in perspective, it amounts to buying back about 10% of Meta's market cap before the earnings announcement. Of course if META stock remains at this heightened level, then a much smaller percentage of shares will be repurchased over the length of the policy. The company still retains about $11 billion from a previous repurchase program and spent almost $7 billion buying back shares in the fourth quarter.

Shareholders were also relieved that revenue for the fourth quarter came in ahead of consensus. Sales of $32.17 billion, nearly half a billion ahead of Wall Street's expectations, demonstrated that digital advertising had not dried up as feared. Smaller social media competitor Snap (SNAP) dropped 10% Wednesday due to its own digital advertising slump.

Meta, however, missed earnings by a wide margin. The company reported $1.76 a share in GAAP earnings per share (EPS) compared with expectations of $2.24. The market decided to ignore this bit of bad news, because Mark Zuckerberg opted to give Wall Street what it wanted – spendings cuts. Zuckerberg had already announced 11,000 jobs cuts back in November but now said that additional layoffs are likely in 2023.

Full-year guidance cut spending from a range of $89 billion to $95 billion from an earlier range of $94 billion to $100 billion – or about $3 billion at the midpoint. Importantly for analysts, full-year guidance shows capital expenditures dropping by $4 billion on average, much of which is likely from Meta's Reality Labs unit focused on the metaverse. Spending on the metaverse was a primary reason for analysts blacklisting the stock in the second half of 2022, but it seems Zuckerberg has gotten the picture and is willing to compromise.

Management guided for $27.25 billion in sales during Q1, in line with analyst consensus.

Meta Platforms stock forecast

META stock exploded afterhours but interestingly stopped right at the $183/$184 highs from July and August of last year. That means Meta Platforms' share price may need to consolidate below this point before retesting it. With such a largescale jump in the share price in one session, it would not be surprising to see META stock close well below $184 on Thursday as traders understandably take profits.

Above $184, bulls will eventually target the $200 psychological level, which happens to coincide with the 423.6% Fibonacci extension level on the 4-hour chart. Before that META stock will need to overcome the 361.8% Fibo at $190.38. Support should be available near $170, a resistance level from last September.

META 4-hour chart