Meta CEO Mark Zuckerberg's additional jobs cuts will lead to more sustainable growth, reinforcing why we're shareholders

Published Tue, Mar 14 202311:35 AM EDT

Meta Platform s' (META) second round of layoffs, announced Tuesday, shows how serious CEO Mark Zuckerberg is about his "year of efficiency" mandate — further convincing us as shareholders that the company is moving in the right direction to reduce costs during these uncertain economic times. The stock, already on a roll this year after a disastrous 2022, soared more than 5.5% on the news. In a memo on Meta's website , Zuckerberg said the company will be reducing its workforce by another 10,000 people while deciding not to hire 5,000 open roles. Additionally, he said the company will also undergo a restructuring to flatten its organization while, in his words, "canceling lower priority projects." Tuesday's announcement comes about a week after reports started surfacing that the Facebook and Instagram parent would potentially slash thousands more jobs . Zuckerberg said these moves aim to improve the tech giant's "financial performance in a difficult environment." He also encouraged employees to "find more opportunities to work with your colleagues in person," citing early analysis by the company that he said points to increased productivity from in-office work. Jim Cramer on Tuesday said Zuckerberg's "flatter is faster" and "leaner is better" approach is another positive step toward focusing on profitability. "He realized that he's got this fantastic business [and] he's spending too much money on it," Jim said — calling Zuckerberg's message a "manifesto" acknowledging that Big Tech is just like all the other companies in the world. While predicting Meta should be in a position to "blow away earnings like we've never seen," Jim did say the company needs to next reduce its capital expenditures. META 1Y mountain Meta Platforms (META) 1-year performance In November, Meta announced it was letting go of 11,000 employees , or about 13% of its workforce at that time, after overhiring during the Covid pandemic. Zuckerberg made the decision after the company reported disappointing third-quarter results , along with its rising costs and expenses — leading to investor frustrations, particularly regarding the company's heavy investment in the metaverse. But, in early February, Meta delivered a fourth-quarter earnings beat, promising investors that 2023 would be the company's "year of efficiency," and the stock soared 23% the day after. For the year to date, Meta shares have gained more than 58% Looking ahead, Zuckerberg also reiterated a theme he first started talking about back in July. He said in Tuesday's memo, "I think we should prepare ourselves for the possibility that this new economic reality will continue for many years." Bottom line Meta's second round of job cuts shows us that the company is serious about managing costs and prioritizing profitability. We are pleased to see that Meta has embraced expense cuts to become a leaner organization that better fits today's reality of increased competition, slower economic growth, and a higher interest rate environment. We think Zuckerberg's new vision of efficiency will support higher earnings and increase the stock price. But more importantly, Meta's plan shows that this is the end of tech companies overspending and realigning priorities to ensure companies like Meta and other tech giants have a long runway for growth in the years ahead. Jim said in Tuesday's Morning Meeting that Meta is "rapidly becoming my favorite stock in the portfolio." (Jim Cramer's Charitable Trust is long META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Facebook Chief Executive Officer and founder, Mark Zuckerberg, leaving the Merrion Hotel in Dublin after meeting with Irish politicians to discuss regulation of social media, transparrency in political advertising and the safety of young people and vulnerable adults. On Tuesday, April 2, 2019, in Dublin, Ireland.

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