Meta’s nearly US$197 billion surge makes Wall Street history

The backstory: Back in 2004 (it just turned 20 on February 4), Facebook (now known as Meta) kicked off in a college dorm and has since become a major social media giant, connecting over 3 billion people and reshaping how we share information. Facebook is just one product under its parent company, Meta, which also owns and operates Instagram, Threads and WhatsApp alongside other products and services.

Jumping to recent times, Meta's been juggling big investments in tech like artificial intelligence (AI) and virtual reality (VR) while making sure its main digital advertising business stays strong. But in 2022, Meta hit a rough patch, losing over 75% of its value. The company responded by calling 2023 the "year of efficiency" and cutting over 20,000 jobs. Even though Meta trimmed its costs, it stayed devoted to its AI and VR investments. Yet, Meta's Reality Labs division (which is working on this tech) saw a US$16 billion loss in 2023.

More recently: Right before Meta shared its financial results last Friday, CEO Mark Zuckerberg testified before the US Senate about child safety online on Wednesday. In the hearing, he publicly apologized to parents whose children had encountered instances of sexual abuse on the platform.

The development: Meta shared great financial news on Friday, revealing its first dividend and impressive financial success, thanks to solid ad sales during the holidays. This led to a quick impact – Meta's shares jumped over 20% on Friday, closing at a record high of US$474.99. This surge added over US$196 billion to Meta's market cap, pushing its total valuation to over US$1.2 trillion. It was the biggest one-day gain in market history.

Meta's earnings rose by 25% in the last quarter, going from US$32.2 billion to US$40.1 billion. The company's net income more than tripled, jumping from US$4.65 billion to US$14 billion. Looking ahead, Meta expects sales between US$34.5 billion and US$37 billion for the first quarter this year, beating analysts' predictions of US$33.8 billion. Meta also announced its first dividend payout of 50 cents per share to investors to be paid on March 26 and authorized a US$50 billion share buyback program. This decision was driven by Meta's growing cash stockpile, increasing from US$40.7 billion to US$65.4 billion in 2023.

Key comments:

"We had a good quarter as our community and business continue to grow," Meta CEO Mark Zuckerberg said in a statement. "We've made a lot of progress on our vision for advancing AI and the metaverse." 

"Solid execution, faster growth and increased capital structure efficiency improve the outlook from here," said Brian Nowak, an analyst at Morgan Stanley, in a note Friday.

"This was one of the most impressive quarters – intrinsically and vs. expectations," said Evercore ISI analyst Mark Mahaney.

"Mark Zuckerberg is showing that he wants to bring shareholders along with him and is highlighting that Meta is now a mature, grown-up business," said Ben Barringer, technology analyst at Quilter Cheviot, in emailed comments to CNBC.

"Our management theme for 2023 is the 'Year of Efficiency,' and we're focused on becoming a stronger and more nimble organization," said Zuckerberg last year.