Meta Platforms Earnings: Will they add fuel to the stock’s uptrend? – Stock Market News
July 25, 2023 12:28 pm
This week, investors are locking their gaze on their screens, awaiting earnings results from tech-giants in order to evaluate whether they were correct on increasing so much their exposures since October. With the euphoria around artificial intelligence (AI) being the main catalyst behind this accelerating uptrend, market participants may be eager to find out more about Meta Platforms’ earnings and plans to leverage its AI business when the firm announces its Q2 results on Wednesday after the closing bell.
Is another beat on the cards?
Meta is forecast to announce earnings per share (EPS) of $2.93 during Q2, which would mark an 18.50% jump from the same period last year, while revenue is expected to have increased 7.96% to 31.1bn.
The company has made drastic changes over the last year, including pivoting its focus away from the metaverse, releasing a new Virtual Reality (VR) headset, proceeding with massive layoffs, and more recently launching ‘Threads’, a competitor to Twitter.
Therefore, with all these revenue boosts, the risks may be tilted to the upside. In other words, there may be more chances for Wednesday’s results to beat their estimates for another quarter rather than to miss them. However, the consensus EPS estimate for this quarter has been revised 0.94% higher over the last 30 days, which means that analysts are becoming more optimistic heading into the release and thereby, if the actual numbers fall short of their estimates, a potential slide in the stock may be larger than a potential advance in case of better results.
Expanding AI business plans
Meta is also expanding its AI business, with news headlines suggesting a partnership with Microsoft to launch a commercial version of its open-source AI language model, Llama 2 on Azure (Microsoft’s cloud platform) and Windows. This could end up being a free alternative to more expensive models sold by OpenAI and Google.
What’s more, with more than 2bn daily active users, the giant has access to an enormous stockpile of data and thus numerous opportunities for leveraging AI. The firm is already planning to optimize through AI the way it is connecting people over Facebook, Instagram, Messenger, and WhatsApp, by exploring chat experiences, visual creation tools for posts and advertising.
Despite the rally, still not so expensive
From a multiples’ perspective, Meta Platforms appears to be the second cheapest within the ‘Magnificent 7’ group, with a forward price-to-earnings ratio (P/E) of 21.47x. This multiple is slightly above the forward P/E ratio of the S&P 500 at 19.8x and below its own 10-year moving average.
That said, in terms of performance, Meta is the second-best performer within the group, behind Nvidia, gaining around 215% since the October lows. This adds to the view that there may be a decent slide in Meta’s stock price if Wednesday’s results come in weaker than expected.
However, a potential retreat is unlikely to lead to a bearish reversal if the firm continues to project accelerating free cash flows throughout 2024. Usually, high-growth tech firms are valued by discounting expected cash flows, and thus, should the new projections continue to point to a trend similar to those released in Q1, investors may see a potential slide in the stock price as an opportunity to buy at a more attractive level, especially if on the same day, the Fed fails to convince market participants that no rate cuts are on next year’s agenda.
Technicals point to an uptrend
From a technical standpoint, the stock of Meta has already been in a sliding mode since July 20, but it continues to trade above the uptrend line drawn from the low of December 29, 2022. Overall, the stock has been in an uptrend since the beginning of November and thus, as long as the price structure remains of higher highs and higher lows, the outlook may be considered positive.
A slide extension may trigger fresh buy orders near the $277 zone, which offered support on June 20, but also acted as resistance on June 6. A potential rebound from there could aim for another test at the high of July 19 at $319, the break of which would confirm a higher high and thereby, a trend continuation. The next target may be the $355 zone, which stopped the share price from moving higher back in November and December 2021.
For the picture to start looking gloomier, Meta’s stock may have to break below $277. Such a dip would also confirm the break below the aforementioned uptrend line and perhaps aim for the low of June 8 at around $260. If there are no buyers to be found near that zone either, the decline may extend towards the $230 territory, marked by the low of May 5.
This week, investors are locking their gaze on their screens, awaiting earnings results from tech-giants in order to evaluate whether they were correct on increasing so much their exposures since October. With the euphoria around artificial intelligence (AI) being the main catalyst behind this accelerating uptrend, market participants may be eager to find out more about Meta Platforms’ earnings and plans to leverage its AI business when the firm announces its Q2 results on Wednesday after the closing bell.
Is another beat on the cards?
Meta is forecast to announce earnings per share (EPS) of $2.93 during Q2, which would mark an 18.50% jump from the same period last year, while revenue is expected to have increased 7.96% to 31.1bn.
The company has made drastic changes over the last year, including pivoting its focus away from the metaverse, releasing a new Virtual Reality (VR) headset, proceeding with massive layoffs, and more recently launching ‘Threads’, a competitor to Twitter.
Therefore, with all these revenue boosts, the risks may be tilted to the upside. In other words, there may be more chances for Wednesday’s results to beat their estimates for another quarter rather than to miss them. However, the consensus EPS estimate for this quarter has been revised 0.94% higher over the last 30 days, which means that analysts are becoming more optimistic heading into the release and thereby, if the actual numbers fall short of their estimates, a potential slide in the stock may be larger than a potential advance in case of better results.
Expanding AI business plans
Meta is also expanding its AI business, with news headlines suggesting a partnership with Microsoft to launch a commercial version of its open-source AI language model, Llama 2 on Azure (Microsoft’s cloud platform) and Windows. This could end up being a free alternative to more expensive models sold by OpenAI and Google.
What’s more, with more than 2bn daily active users, the giant has access to an enormous stockpile of data and thus numerous opportunities for leveraging AI. The firm is already planning to optimize through AI the way it is connecting people over Facebook, Instagram, Messenger, and WhatsApp, by exploring chat experiences, visual creation tools for posts and advertising.
Despite the rally, still not so expensive
From a multiples’ perspective, Meta Platforms appears to be the second cheapest within the ‘Magnificent 7’ group, with a forward price-to-earnings ratio (P/E) of 21.47x. This multiple is slightly above the forward P/E ratio of the S&P 500 at 19.8x and below its own 10-year moving average.
That said, in terms of performance, Meta is the second-best performer within the group, behind Nvidia, gaining around 215% since the October lows. This adds to the view that there may be a decent slide in Meta’s stock price if Wednesday’s results come in weaker than expected.
However, a potential retreat is unlikely to lead to a bearish reversal if the firm continues to project accelerating free cash flows throughout 2024. Usually, high-growth tech firms are valued by discounting expected cash flows, and thus, should the new projections continue to point to a trend similar to those released in Q1, investors may see a potential slide in the stock price as an opportunity to buy at a more attractive level, especially if on the same day, the Fed fails to convince market participants that no rate cuts are on next year’s agenda.
Technicals point to an uptrend
From a technical standpoint, the stock of Meta has already been in a sliding mode since July 20, but it continues to trade above the uptrend line drawn from the low of December 29, 2022. Overall, the stock has been in an uptrend since the beginning of November and thus, as long as the price structure remains of higher highs and higher lows, the outlook may be considered positive.
A slide extension may trigger fresh buy orders near the $277 zone, which offered support on June 20, but also acted as resistance on June 6. A potential rebound from there could aim for another test at the high of July 19 at $319, the break of which would confirm a higher high and thereby, a trend continuation. The next target may be the $355 zone, which stopped the share price from moving higher back in November and December 2021.
For the picture to start looking gloomier, Meta’s stock may have to break below $277. Such a dip would also confirm the break below the aforementioned uptrend line and perhaps aim for the low of June 8 at around $260. If there are no buyers to be found near that zone either, the decline may extend towards the $230 territory, marked by the low of May 5.
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