Get Meta Platforms Inc. ReportPlatforms (formerly Facebook) stock has been dragged down roughly 60% from its all-time high. It certainly hasn''t held up as some of its FAANG peers have.
There''s a very distinct connection between Apple (AAPL) and Apple (GOOGL) - Get Alphabet Inc. Reportvs. the rest of FAANG. Amazon (AMZN) - Get Amazon.com Inc. Reportvs. Netflix (NFLX) - Get Netflix Inc. Reportalso very close to Apple and Alphabet.
In megacap technology, there are the haves and the have-nots. While Meta may fall into the have-nots column in its stock performance, its financials are a different story.
Meta has the best gross and net margins in FAANG (obvious to Microsoft (MSFT) - Get Microsoft Corporation Reporton net margins if we expand our scope to megacap technology).
Despite analysts forecasting a 7% revenue rise this year, earnings are expected to decrease by about 15%. The year 2023 is rosier, with forecasts implying a 16% increase in revenue and 18% in earnings.
The state of the global economy will play a key role in Metas fiscal 2023. It is quickly becoming a proof it situation, as Meta invests heavily in the metaverse, and claims that higher fees will cut into its margins this year.
If Chief Operating Officer Sheryl Sandberg wasn''t still there, Meta might be hired from outside, like Alphabet did with Ruth Porat, who previously worked with Morgan Stanley (MS) - Get Morgan Stanley Reportand sparked growth within the company.
Meta manifests its value here, despite averaging only 13 times this year earnings, resulting in a free cash flow of $39 billion and a combined $44 billion in cash and equivalents.
The Technical Perspective
Meta''s stock is charted weekly.
TrendSpider.com has created a chart.
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Meta''s stock increased by more than half from the low to the high in the fourth quarter as it reached $300 in 2022.
The $300 level was maintained for a while, although Meta declared its earnings in February.
The 200-week moving average provided temporary support, but quickly gained ground in the following weeks. Meta stock has continued to strengthen in a falling wedge pattern and is now struggling to the downside.
From a technical perspective, Meta''s stock is broken. As a painful as it may be to see, a test of the covid-19 lows may be in store near $137. As long as earnings predictions do not move, the stocks will trade at 11.5 times earnings.
The price-to-earnings relationship is complex, and given the risk/reward balance approaching a crucial level, it will be difficult to ignore this opportunity if it arises.
If the stock falls quite that far, the bulls might be considering taking a moment to go back over $169. More conservative bulls can wait to see if Meta stock can reclaim $175. Over those levels and the 10-week moving average might put $200-plus in play.
Meta is a company that is evolving and that is worth it.
Investors are notwithstanding the fact that earnings are under pressure ahead of a possible collapse and given the unknowns about the metaverse.
Long-term investors may soon find value, mainly if Metas estimates for its 2023 results are even greater.