Meta's impressive earnings leave short sellers in turmoil: But can the stock soar even higher?

Meta's Financial Renaissance: Analyzing Earnings Surges, Strategic Shifts, and Future Trajectories Amidst Market Turbulence

By Farah Mourad | 7 February 2024

Copied
aeda7ddf-e81d-4149-8f9e-998bad9c88b0

Meta, formerly known as Facebook, has emerged from the shadows of market uncertainty with a financial performance that commands attention. Despite the backdrop of disappointing ad sales reported by competitor Alphabet, Meta's recent resurgence has left investors intrigued and impressed.

The company's success can be attributed to a combination of factors, including robust user growth, a rebound in ad sales, cost-cutting measures, and unwavering investor confidence in its ambitious AI and metaverse ventures. In the fourth quarter, Meta surpassed expectations, boasting a revenue of $40.11 billion and painting a positive outlook for Q1. However, challenges persist, particularly within the metaverse segment, as losses in Reality Labs continue to raise concerns.

Yet, amidst these challenges, Meta's strategic maneuvers have turned heads and earned nods of approval from investors. Moves such as the $50 billion buyback authorization and the announcement of its inaugural dividend have positioned Meta as a formidable force in the tech industry. Notably, Meta's heavy reliance on advertising underscores the significance of its ongoing initiatives, including the growing influence of Chinese advertisers, AI-driven ad growth, and the rising importance of messaging platforms as revenue streams.

Picture1

On the hourly chart The Bollinger Bands are signaling major volatility in Meta stock. Following strong earnings, prices surged from the lower support level of the uptrend, breaking above it at 393 points and continuing upwards to 485 points, showing bullish momentum. Currently trading at 460 points, there's potential for a correction, possibly down to test local support at 447 points. However, it's also possible that prices may retest the upper level of the uptrend.

Looking ahead to 2024, Meta's growth trajectory appears promising as the company allocates a substantial portion of its capital budget—ranging between $30 billion and $37 billion—towards investments in artificial intelligence. This emphasis on AI is further highlighted by Meta's commitment to deploying Generative AI, leveraging Nvidia's advanced chips to train cutting-edge models. However, amidst the optimism, caution is advised, as the statistical anomaly of Meta Platforms' stock price momentum suggests a potential correction or stability in its upward trajectory.

Moreover, Meta's growth is subject not only to its own performance but also to broader market dynamics and risk appetites. While Wall Street's risk appetite is expected to persist, potential slowdowns in the tech sector compared to other industries could impact Meta's growth, particularly considering observed deeper corrections on NASDAQ compared to Dow Jones during market uncertainties.

Our analysis of the topic was shared on Financial News London. Read our commentary on their platform:

https://www.fnlondon.com/articles/meta-stock-buy-sell-short-sellers-with-2-3bn-in-losses-20240205

Copied