Meta analyst projects potential cost savings from new round of layoffs, mostly from Metaverse

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  • mizuho Analyst James Lee reiterates Buy Meta Platforms Inc (Nasdaq: META) with a $210 price target,

  • Several major news outlets indicated that Meta may launch another round of layoffs On the same scale as the last round at 13% of employees.

  • Reportedly, the focus of the restructuring is the wearable devices units within the Metaverse division.

  • At the same time, the company is reportedly shutting down its New Product Experiment Group created in 2019.

  • Meta will transition any new development efforts into existing product development teams.

  • Lee applauded the company’s efforts to bring in more efficiencies during the economic uncertainty, and the FY23E consensus means Reality Labs to spend 12% of revenue (or $14 billion) in FY23. Therefore, the ability to optimize costs is meaningful.

  • Based on reports, the analyst estimates that total savings of $1.1 billion for FY23E could come from reduction in headcount.

  • In addition, analysts estimate an additional $1.1 billion in potential cost savings from discontinued products and projects in the Metaverse and New Product Experimentation clusters.

  • Lee estimates that total cost savings for FY23 could reach $2.3 billion, or about 7% above the consensus FY23E OPI.

  • The analyst sees further catalysts if the reported restructuring is executed along with OpEx savings from discontinued products.

  • Price Action: At last check Monday, were trading up 1.71% at $182.58.

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