Meta Platforms, Inc. META has been the second best-performing Magnificent 7 stock this year after artificial intelligence stalwart Nvidia Corp. NVDA. The stock rally has nudged its co-founder and CEO, Mark Zuckerberg, to be higher on the list of the world’s wealthiest people.
Zuckerberg Pips Past Bezos: Bloomberg’s updated billionaire list shows Zuckerberg rising in rank and becoming the world’s second-richest person after Tesla, Inc.’s TSLA Elon Musk. The loser was Amazon, Inc. AMZN founder Jeff Bezos, who had stepped down from an active management role in the company that he founded in 1994. Bezos ceded his second position to the Meta CEO amid the relative outperformance of the social-media giant’s stock.
Here’s how the two stocks fared this year:
Chart Courtesy of Benzinga Pro
Meta has gained over 64% for the year-to-date period compared to Amazon’s roughly 20% gain. After moving almost in tandem with Meta, albeit with a more modest gain, for much of the year, Amazon has clearly begun diverging since late September.
Zuckerberg’s net worth is $206 billion, slightly higher than Bezos’ $205 billion. More importantly, the Meta CEO is only $50 billion in deficit versus Musk’s wealth. It could come as no surprise if he soon takes over the crown from Musk, given Meta’s potential versus Tesla’s pitfalls. Tesla is still struggling to turn around its core electric-vehicle business to trend-like growth and promising opportunities such as full self-driving technology and robotaxi are expected only to be long-term drivers.
Be it Zuckerberg or Bezos, much of their wealth is tied to stock ownership in the respective companies they founded. Stock vagaries could therefore play a key role in deciding their fortunes.
See Also: How To Buy Meta (Formerly Facebook) Stock
What’s Firing Up Facebook Parent: Meta was among the COVID-19 play that benefited from the work-from-home and lockdown restrictions that were in place then. The pandemic rally stalled in Sept. 2021, and the stock began a year-long secular downtrend until early November 2022. Declines in both top and bottom-line figures amid an ad spending slowdown, investment into the loss-making Reality Labs division, Apple‘s privacy initiatives, and a competitive threat from TikTok all served as drags.
Meta’s management though was quick with resuscitation measures and unveiled strategic plans to streamline operations and navigate through adverse conditions. In Nov. 2022, the company announced a significant workforce reduction, eliminating 11,000 employees as the initial step.
In a letter to employees detailing the layoffs, CEO Mark Zuckerberg outlined additional measures, including desk sharing for remote workers, infrastructure review for spending cuts, and a hiring freeze until the first quarter of 2023. The market responded positively to these resuscitation measures, leading to a rebound in Meta's stock from its six-year low.
Meta’s AI pivot and the Metaverse project also helped rekindle investor interest in the stock. After bottoming in Oct. 2022, the stock has been on a broader steady uptrend. The Meta Connect 2024 held in late September has proved salubrious for the stock. The company announced AI-driven chatbots, an update to its Llama large-language model, the latest Ray-Ban smart glasses with improved camera functionality, voice controls, and deeper integration with AI, Meta Quest 4, the next-generation virtual reality headset, and the Orion augmented reality glasses.
Amazon’s Lags: Amazon, though operating in multiple technology areas, still derives the bulk of its revenue from its core e-commerce business, with much of the revenue collected from North America. The prospects of the business are strongly tied to consumer spending, which has remained uncertain in the current economic cycle.
The company has built up, or integrated scores of other businesses, including its AWS cloud computing business, Zoox, a self-driving car division, Kuiper Systems, a satellite Internet provider, and Amazon Lab126, a computer hardware R&D provider. Its subsidiaries include Ring, Twitch, IMDb, and brick-and-mortar grocery retailer Whole Foods Market.
In a note released on Thursday, Morgan Stanley analyst Brian Nowak sounded out near-term risks. “We still see tactical risk to 4Q EBIT guide as AMZN invests to drive its faster-growing, lower-margin essentials business through a competitive holiday,” the analyst said.
Nowak, however, committed to the stock medium- and long-term. He said he would buy any weakness as he believes the company will make low-priced essentials profitable and will pursue a cost structure that provides visibility into a path to $8-$9 of free cash flow.
Meta closed Thursday’s session 1.74% higher at $582.77, while Amazon fell 1.52% to $181.96, according to Benzinga Pro data. Amazon stock has been on a seven-session losing streak amid worries concerning the holiday season after the company’s temporary holiday hiring plan revealed a flattish trend.
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