Meta shares are up 170% in five months despite virtually no revenue growth

Facebook's stock is soaring, despite three quarters of shrinking revenue.

Meta shares are up 170% in five months despite virtually no revenue growth

Meta's stock chart shows that it is not the same story of explosive growth as in the past.

Facebook's parent company reported a meager 3% revenue increase from a year ago, which was higher than the analysts expected. Meta reported sales declines for three consecutive quarters before that. This highlighted the challenges Meta faced in coping with a digital ad slowdown.

Meta's shares have risen 170% from their November low of $89, after a rally of 15% on Thursday.

Investors have largely jumped on Meta's story of cost-cutting and job cuts, which began in Novembre and continue in the first half of 2023. In February, Mark Zuckerberg declared that this year would be "the company's year of efficiency", a statement which sent the stock price up by over 20%.

Meta shares remain 37% below the record high set in September 2021, despite the recent upswing. The shares lost almost two-thirds their value in the past year as Meta faced its most difficult period since its IPO a decade ago.

Wall Street is now betting that Meta will slowly begin to revive its growth. After a weak 2022, comparisons are easier and the newer products have begun to gain traction.

Finance chief Susan Li said on the earnings call held Wednesday that Reels, a short-form video app similar to TikTok, is "on course to become neutral in revenue by year's end, or early next year."

Reels is currently monetizing at a slower rate than older, more established products such as the News Feed and Stories. Meta is trying to figure out how it can better monetize Reels. At the same time, TikTok - owned by Chinese company ByteDance - is under heavy scrutiny from U.S. legislators, and many are trying to ban this app.

Mizuho Securities analysts cited improved ad prices as Meta's catalyst, fueled by Reels and message.

Analysts recommend that the stock be purchased because of the "better monetization", the additional cost-efficiency room, and the increased scrutiny TikTok is receiving.

Piper Sandler analyst, who has a buy recommendation on Meta, stated that Meta is in an advantageous revenue position for the remainder of the year. The analysts noted that the "user growth is strong" and stated that the business could continue to expand even with a lower headcount.

The analysts noted that Meta had "successfully 'passed on the baton'" from cost reductions to revenue acceleration.

The project is still bleeding money. Reality Labs, the division responsible for creating software and hardware for metaverse, has lost $3.99 billion since the first quarter of 2022.

Artificial intelligence is a growing market. Zuckerberg has repeatedly highlighted his company's investment in generative AI. This technology is popularized by Microsoft-backed OpenAI and its text-generating ChatGPT.

Bank of America analysts stated in a recent report that Meta's stock could be boosted by the development of an AI eco-system.

The analysts who rate the stock as a "buy" wrote that, from a business standpoint, Meta has outlined the opportunities for AI-enabled ad content and automated customer support using Meta's message platforms. The analysts wrote that a multi-year AI-driven platform retention could be a key to multiple expansion as terminal value uncertainty had weighed on valuation.

Watch: Meta's earnings represent one of the greatest turnarounds of all time.