Meta Analyst Estimates Potential Cost Savings From Fresh Round Of Layoffs, Mostly from Metaverse

Mizuho analyst James Lee reiterated Buy on Meta Platforms Inc META with a $210 price target.
Several major news outlets indicated that Meta could initiate another round of layoffs at a similar scale to the last round at 13% of employees.
Reportedly, the focus of the restructuring is wearable-device units within the Metaverse division.
At the same time, the company is reportedly shutting down its New Product Experiment Group, created in 2019.
Meta would fold any new development efforts into existing product development teams.
Lee applauds the company’s efforts to drive further efficiency during economic uncertainty, and FY23E consensus implies Reality Labs to incur expenses at 12% of revenues in FY23 (or $14 billion). Hence, the capacity for cost optimization is meaningful.
Based on reports, the analyst estimates total savings of $1.1 billion for FY23E could come from headcount reduction.
Furthermore, the analyst estimates additional potential cost savings of $1.1 billion from discontinued products and projects in Metaverse and New Product Experiment Groups.
Lee estimates total cost savings could reach $2.3 billion for FY23, or nearly 7% upside to consensus FY23E OPI.
The analyst sees further catalysts if the reported restructuring gets executed along with opex savings from discontinued products.
Price Action: META shares traded higher by 1.71% at $182.58 on the last check Monday.

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