Meta appears to have finally turned a corner after a disastrous 2022 that saw its share price plummet. In February this year, CEO Mark Zuckerberg declared 2023 a 'year of efficiency'.
This time last year, Meta faced a crisis of confidence that led to a significant drop in its share price, to its lowest point since 2016.
Sales fell, TikTok gained popularity and Zuckerberg's ambitious bet on the metaverse seemed to drain resources.
But throughout 2023, Meta seems to be on the rise. Shares closed Monday up 176 percent for the year, marking their best performance ever and surpassing the 105 percent gain in 2013, the year after Facebook entered the stock market.
On Monday, shares rose another 2.9 percent to reach $344.62 — a nearly two-year high and just 10 percent below the September 2021 record high at the peak of the last tech boom.
Meta has seen a remarkable turnaround in 2023, with shares rising 176%, marking its best year ever after CEO Mark Zuckerberg emphasized efficiency and cost savings, helping to fuel the company's recovery after a 64% stock plunge in 2022
During 2023, Meta seems to be on the rise. Shares closed Monday up 176% for the year, their best performance ever
Meta's recovery appears to justify Zuckerberg's statement in February that this year would be the company's “year of efficiency” after a 64 percent share decline in 2022.
Zuckerberg called cost cutting a priority, leading to more than 20,000 job cuts within Facebook's parent company.
Economic challenges, increased competition and a loss of advertising revenue “all caused our revenues to be much lower than I expected,” Zuckerberg said earlier this year.
But now, after three consecutive quarters of declining sales in 2022, Meta has experienced growth over the past year.
The rebound was driven by a recovery in digital advertising and capturing market share from competitors such as Google's Alphabet and Snap.
One analyst believes Zuckerberg has undergone a “change of attitude” and appears willing to address shareholder concerns rather than dismissing them, which had been his previous approach.
In 2022, Meta CEO Mark Zuckerberg's metaverse idea was roundly mocked and the idea seemed to drain the company's resources
Despite challenges including legal issues and a volatile digital advertising market, Meta's shift in focus from the metaverse to advertising appears to have played a key role in its comeback
“It was Zuck's change in tone,” said Jake Dollarhide, CEO of Longbow Asset Management CNBC.
“He went from thumbing his nose at shareholders and talking about the billions he was spending on the metaverse to listening and communicating in a different way,” Dollarhide explains.
Zuckerberg also appears to have reset his priorities, with a sharper focus on ad revenue rather than the metaverse in which he had invested heavily.
Although Meta has managed to bounce back in 2023, uncertainties remain, especially regarding the evolving digital advertising landscape on which the company depends for its profits.
Meta is also facing several new lawsuits alleging that its products cause harm and addiction to children.
Amid the sweeping budget cuts at Meta, one part of the company has increased its budget: Zuckerberg's hefty private security bill.
The 38-year-old, whose net worth is estimated at $118 billion, received a 40 percent increase in his pre-tax security benefit from $10 million to $14 million. The walk was signed by the Meta board of directors.
According to reports, that will cover just under half of its annual security bill of about $25 million.
Nvdia, which produces computer chips, has returned nearly 250 percent this year and is the best performer in the S&P 500
Meta's stock surge is one of a handful of tech stocks that have become known as the “Magnificent Seven” by Wall Street.
The others, Apple, Amazon, Alphabet, NVIDIA, Microsoft and Tesla combined, are up about 75 percent since the start of the year and the Americans who have them in their 401(k) savings accounts will get a big boost as a result got.
The 493 other companies in the S&P 500 – an index of America's 500 largest companies – rose by about 12 percent.
Overall, the S&P 500 rose nearly 23 percent through December 18, thanks to these seven powerful tech companies. Many 401(k) accounts have at least some money invested in the benchmark index, and they will have benefited from the rally during the year.
The spectacular growth of Magnificent Seven companies is widely attributed to this year's artificial intelligence craze and more recently to increased expectations that the Federal Reserve will begin cutting interest rates next year.
As market share grew, the Magnificent Seven represented a massive 33 percent of the S&P 500 index. The 493 other non-Magnificent Seven companies in the S&P 500 rose only about 12 percent
Technology stocks took a hit last year when the Federal Reserve began raising interest rates, but have started to recover quickly this year.
That was sparked in part by the release of OpenAI's Chat GPT, which alerted investors and the masses alike to the power of AI and the ways it will likely shape the future.
Nvdia, which produces computer chips, has returned nearly 250 percent this year and is the best performer in the S&P 500.
Investors remain confident that Nvidia will remain the dominant and leading supplier of computer chips for AI.
And Apple represented more than 8 percent of the S&P 500 as of December 18. In June, it became the first company to be valued at $3 trillion.
Concerns are growing that the index is too heavily weighted towards this small number of technology stocks.
As market share grew, the Magnificent Seven represented a massive 33 percent of the S&P 500 index.
“It's a mind-boggling number to me when I think about an index that should represent such a broad group of companies,” said Ann Miletti of Allspring Global Investments. told the Wall Street Journal.
The term Magnificent Seven was coined by Bank of America analyst Michael Hartnett, who used the term in a research note earlier this year.
He told NPR that a precursor to the Magnificent Seven is the Four Horseman, a term Wall Street used in the 1990s to describe Cisco, Dell, Intel and Microsoft, whose growth at the time was fueled by the rise of the Internet.
“You know how that ended,” he told NPR, referring to the bursting of the dot-com bubble.
Matt Orton, market strategist at Raymond James Investment Management, told the Journal he expects the Magnificent Seven's dominant era may not last into the new year.
A trader is seen working at the New York Stock Exchange on November 16
“We've transitioned to a bit of a more normalized market environment, where some of the things that haven't worked for a long time are finally starting to work again,” Orton said.
This can also be other sectors, such as industry, materials and transport.
Other analysts predict that next year's elections will play an important role in the markets. Saira Malik, chief investment officer at Nuveen, told Barron that stock prices may fall, but ultimately end on a high next year.
“Historically, the S&P 500 has risen three-quarters of the time in presidential election years — by an average of 7.5 percent,” she said. “Normally you get some volatility around the election and then a relief rally through the end of the year.”