To The Moon

$Meta Platforms, Inc.(META)$ will be reporting its earnings for third-quarter after the market close on Wednesday (30 Oct).

Investors are watching whether META’s stock could keep up with its strong performance so far in 2024.

Analysts expect Meta to post third-quarter revenue of $40.25 billion, surging nearly 18% year-over-year. Net income is projected to land at $13.56 billion or $5.21 per share, up from $11.58 billion or $4.39 per share a year ago.

Continued Gains From AI To Optimize Its Ad Business

In the last earnings in July, we saw META share price went up after they reported that they are seeing seen early gains from artificial intelligence (AI) to optimize user engagement, benefitting its ad business.

For this quarter, we have Deutsche Bank analysts told clients earlier this month they expect Meta's AI-driven optimization campaign to continue to bring "durable ad wallet share gains.”

So investors might be looking at the advertising revenue which META posted $38.33 billion in the second quarter. The revenue consensus for the third quarter currently is at $39.54 billion.

Can Llama 3.2 Further Help META in Its Artificial Intelligence Advances

In July this year, we have heard META CEO Zuckerberg said that Meta AI is "on track to be the most used AI assistant in the world by the end of the year.”

In September, we saw Meta released Llama 3.2, its most capable open-source AI model yet, in its efforts to compete with Microsoft-backed (MSFT) OpenAI, Alphabet's (GOOGL) Google, and Amazon-backed (AMZN) Anthropic.

So the development of the Meta AI, will it be too late to capture the market as we have seen the integration of ChatGPT in Apple devices already. I think we might want to see when or which company would be using Meta AI in integrating with their products.

More information on the deal between Meta and Reuters

The next point that investors would be looking out is the Reuters deal, this would be a focal point as we have seen Meta stock having a great 2024 so far, META have also issued a quarterly dividend of $0.50 each quarter, beginning in Feb 2024.

META has seen great returns with AI and just inked a new deal with Reuters to feature news in Meta's AI chatbot. This is useful to have news in a chatbot, this AI integration also extends to the search functions within Meta's apps, making it more intuitive and easier to find content and explore topics based on what you see in your feed -- what Meta calls a "contextual experience." 

Technical Analysis Show A Top Pullback Before Earnings Results

If we looked at how META is trading now, even though it is trading above the short-term and long-term MA, we are seeing that MACD is in a downside movement,

Multi timeframe though is showing strong upward trend, we might see META experiencing a pullback if what investors looking for does not materialize.

So we might want to watch how the option market is looking at META.

Expected A Higher Price Move After Earnings From Option Implied Volatility

The options market overestimated META stocks earnings move 42% of the time in the last 12 quarters. The predicted move after earnings announcement was ±9.0% on average vs an average of the actual earnings moves of 13.2% (in absolute terms).

This shows that META tended to be more volatile than the options market predicted for the earnings stock price reaction.

Looking at the current implied volatility landscape of the options market can tell us a lot about the expected earnings move for Meta Platforms.

Based on 47 Wall Street analysts offering 12 month price targets for Meta Platforms in the last 3 months. The average price target is $628.77 with a high forecast of $811.00 and a low forecast of $525.00. The average price target represents a 8.75% change from the last price of $578.16.

META stock has a +/- $45.41 expected stock price move through the end of the week, which contains the earnings announcement. With the stock price hovering around $578, this means the weekly expected move is around 7.7% of the current stock price, putting it on the higher end of the range for earnings that normally fall between the 5%-10% range for most stocks.

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. As the implied volatility for downside puts is increasing relative to upside calls, this suggests the market is pricing in a larger fear to a downside move.

The current skew indicator show that it might be slightly bearish.

Summary

While META have showed stellar performance so far in 2024, but there are some factors and points that investors are looking out in the upcoming earnings. One of the factor would be how META have been managing their expenses to further enhance the META AI chatbot.

Will the META AI chatbot bring more advertising revenue? Since the chatbot is offered free to META users, will there be plan for more integration with other platforms?

I will be monitoring META price action in today (29 Oct) trading and see how the market feel about META before its earnings.

Appreciate if you could share your thoughts in the comment section whether you think META could surprise us a better-than-expected EPS and dividends.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.