An Upgrade For Meta Stock. Cost-Cutting Pays Off.

In a recent report released by a Wall Street analyst, Mark Zuckerberg, CEO of Facebook and Instagram parent Meta Platforms META -1.75%, had to save about $300 million by cutting costs in the company.

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As of Wednesday, Argus Research analyst Joseph Bonner upgraded Meta stock (ticker: META) from Hold to Buy, with a $270 price target. Since the stock's emergence in early 2013, Meta stock has accounted for 76% of its gains this year. It was down 1.5%, at $216.60, in recent trades. The S&P 500SPX -0.43% had a loss of 0.5%.

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Aside from Zuckerberg's proclaimed name for the company's "year of efficiency," Bonner cites the company's cost-cutting plans. After laying off 11,000 employees in November, Meta announced the elimination of another 10,000 jobs in March. Bonner says Meta is making some of the deepest cuts in the technology industry.

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A cost cutting strategy will not be much of a solution to Meta's revenue issues, which are a consequence of macroeconomic uncertainties, the slowdown in digital advertising, and Apple's ad tracking policy that will have a significant impact on the firm. However, he wrote in his letter that the cost cutting demonstrated prudence by the company's management and should boost profits. Consequently, the market will receive the product it wants, he wrote.

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Although Meta has been faced with stiff competition from TikTok in recent years, a potential ban in the U.S., or at least sustained hostility from lawmakers, might actually help Meta's prospects. In addition, Bonner says that Twitter has been hobbled since Elon Musk took over the company in 2018, and that his company has been making erratic strategic moves. Meta did not face a major threat from Twitter, but he points out that it did appeal to celebrities, politicians, and media influencers, all of whom are powerful users.

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Currently, Meta is adding new users to its platform every day, which is a testament to the challenges at TikTok and Twitter, he wrote.

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According to Jefferies analyst Brent Thill, in a note he wrote on Wednesday, he increased his price target for the company from $225 to $250. This is despite his old Buy rating. He also believes the company should be able to report an increase in revenue growing in the second half of 2023, aside from possible upside from belt tightening.

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According to him, "the combination of AI investments in higher engagement, easier comps, and accelerated growth will support accelerated revenue growth," he concluded.