META’s share surges 20% (NASDAQ:META) after releasing their Q4 2022 results after markets closed on Wednesday (February 1). As of 12:15 Eastern Standard Time, META shares have risen 24% to $190.20, recovering to their June level.

Quick Outline

1. Key Financial Results
2. Are the Users Still Active?
3. What is the company future direction?
4. 40 Billion Share Repurchase Plans

1. META’s share surges 20% after announcing their Key Financial Results (Source: Meta)

Revenue (In Mil)	FY2021	FY2022	% Changes
Family of Apps	115,655	114,450	-1%
Reality Lab	2,274	2,159	-5%
Total	117,929	117,059	-1%

Operating Income (In Mil)	FY2021	FY2022	% Changes
Family of Apps	56,947	42,662	-25%
Reality Lab	-10,194	-13,717	35%
Total	46,753	28,945	-38%

2. Are the Users Still Active?

During the latest earnings call, the management team stated that their product trends were more favorable than what the market perceived.

META has achieved a daily active user base of two billion and nearly three billion monthly users on Facebook, while its DAU/MAU maintain at 67%.

DAU/MAU stands for Daily Active Users (DAU) to Monthly Active Users (MAU) ratio. It is a metric used to measure the engagement of users on a website or mobile app. It represents the percentage of monthly active users who are using the platform on a daily basis. A high DAU/MAU ratio indicates that users are highly engaged and frequently return to the platform, while a low ratio suggests a lack of engagement or less frequent usage.

Meta‘s AI discovery engine is driving overall engagement and driving higher adoption of Reels, which has led to increased usage across its Family of Apps. The Family of Apps saw Monthly Active People (MAPs) and Daily Active People (DAPs) of 3.74 billion and 2.96 billion, respectively, representing year-on-year increases of 4% and 5%. This strong engagement led to a DAP/MAP ratio of 79.1% for Q4 2022. Reels across Facebook and Instagram have more than doubled over the past year, and the social aspect of users resharing Reels has grown even faster, with a doubling in the past six months on both apps.

3. What is the company future direction?

The two major technological waves driving their roadmap are AI today and over the longer term, the metaverse.

Facebook and Instagram are moving away from a model where content is only from accounts you follow, to one where content is recommended by AI systems. This shift is particularly focused on short-form video, as Reels has seen rapid growth and the social aspect of people sharing Reels has more than doubled on both platforms over the past 6 months. The next challenge in growing Reels is enhancing its monetization efficiency. Currently, Reels’ monetization is less efficient compared to the Feed. As Reels grows, it drives engagement but takes time away from the Feed. Improving monetization efficiency is important to show more Reels without increasing losses.

AI is the foundation of the company’s discovery engine and advertising business and is expected to drive the creation of new products and transformations in their apps. Generative AI is an exciting field with various applications and the goal of the company’s Meta project is to become a leader in this area, as well as in recommendation AI, building on their existing research.

In term of Metaverse, the focus is on delivering better social experiences than what is currently possible on phones, with mixed reality offering immersion and presence in VR. There are already developers creating new experiences, and the company plans to launch a next-gen consumer headset later this year. The VR ecosystem is growing, with over 200 apps generating over $1 million. The vision is to bring the Metaverse to the wider public through phones and build digital identities across the company’s apps.

4. 40 Billion Share Repurchase Plans

In the last quarter of 2022, the company bought back $6.9 billion worth of stock, totaling $27.9 billion for the year. The original share buyback program has a remaining capacity of $10.9 billion, but the company announced the initiation of a new $40 billion share buyback program in its earnings release.

META’s share surges 20%, what next?

Despite the positive developments in META, such as Reels, Click-to-message Ads, and Shop-Ads, the Metaverse segment is still expected to incur financial losses until the end of the fiscal year 2023. Given META‘s slower growth, cash generation and preservation is crucial, and the company’s theme for 2023 is efficiency. The share buyback plans generated significant interest and caused a 20% surge overnight. It’s worth noting that the company’s stock price is now close to fair value according to GoodWhale Valuation Line.

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