META : Can U Save US Market This Week?
Last Week Recap.
It was a volatile week for US stocks last week.
Nasdaq came crashing by a whooping -2.5%, extending its -3.65% losses incurred the week before.
Media has blamed, underwhelming results from $Tesla Motors(TSLA)$ and $Alphabet(GOOG)$ for sparking the selloff.
If “true”, it highlights how high the bar had been set for Magnificent seven earnings as these stocks have helped drive US indices to record highs in 2024.
What Is Ahead This Week ?
On July 2024 home stretch run, investors will want to know if Meta's Q2 earnings can lift the US stock market, in additional to FOMC meeting on US interest rate and US jobs report, which is another story.
Q2 Earnings Preview.
On Wed, 31 Jul 2024, Meta Platforms, Inc. will report its second-quarter earnings after the 4pm bell.
Wall Street expects:
- Earnings per share (EPS): Projected to be $4.70, an increase of +45.2% YoY.
- Revenue: Coming in at $38.29 billion, a gain of +19.6% YoY.
- Net income: Projected to be $12.31 billion, a +58% YoY gain.
Ballooning Expenses?
During its Q1 2024 reporting, Meta has warned that 2024 total expenses could be between $96 and $99 billion, more than previously budgeted.
This was attributed to higher (a) legal and (b) infrastructure investment to support artificial intelligence (AI) ramp up.
Market will be watching closely to see if there would be further increases to projected expenses and the impact of AI integration.
Similar to Google, Meta has emphasized that AI integration in its products contributed to strong Q1 results.
Investors will want an update on how this could continue to drive user engagement.
Like Google, Meta’s advertising revenue will also continue to be in focus.
Afterall, in Q1 2024 reporting, advertising revenues has increased by a healthy +27%.
No doubt, investors will hope for a similar or better performance in Q2, with analysts’ estimates at $37.95 billion or a +20.5% YoY gain.
Other Positive/s ?
In July 2024, Meta released Llama 3.1.
It is a large language model created by Meta Platform, a type of AI that can do things like (a) answer questions, (b) write different kinds of creative content, and (c) translate languages
Llama 3.1 is unique also because its code is publicly available.
This means anyone can (i) access, (ii) study, and (iii) build upon it.
Doing so allows room for:
- Innovation: By sharing, Meta encourages developers worldwide to improve it. This can lead to new ideas and applications that benefit Meta's own products.
- Talent Attraction: Llama 3.1 open source helps Meta attract top AI talent who want to work on cutting-edge projects.
- Industry Leadership: By being a leader in open-source AI, Meta positions itself as a driving force in the AI industry.
Through sharing, Meta hopes to foster a larger AI community that will ultimately benefit the company and the world.
JP Morgan analyst predicts Llama’s launch could make Meta AI "the most used AI assistant by year-end, if not sooner”.
Impending earnings report offers Meta an opportunity to assure investors that any increased spending to invest in AI is helping the company capitalize on a growth opportunity.
Technical Analysis.
(1) Moving Averages. (see below)
Meta’s Tue, 30Jul 2024 closing price - $463.19 per share.
50-day simple moving average is 491.47, creating a Sell signal.
100-day simple moving average is 489.47, creating a Sell signal.
200-day simple moving average is 431.02, creating a Sell signal.
(2) Relative Strength Index (RSI).
As of Tuesday, its RSI was at “40.66” (“neutral” rating); indicating the stock is neither “oversold” nor “overbought”.
(3) Resistance and Support Levels.
It is getting more difficult these days to accurately pinpoint where a stock is heading, especially after an earnings announcement.
Know its resistance and support level will be useful to retail investors like us:
- Pivot point 1st Resistance level (high) - $471.71.
- Pivot point 2nd Resistance level (high) - $480.24.
- Pivot point 1st Support Point (Low) - $455.68.
- Pivot point 2nd Support Point (Low) - $448.18.
Overall Summary.
Looking at the summary, it’s a “Strong Sell” rating overall. (see above)
“Technical” consensus bears the same “Strong Sell” rating, while moving averages consensus garnered “Sell” ratings.
Verdict is still out on whether Meta Platform will bust or boom come Wed, 31 Jul 2024.
My viewpoints : (mine only)
It is hard to fathom that on 4 Nov 2022, Meta was at its pit at $90.60 per share. (see below)
The main reason it hit rock bottom was because of Mark Zuckerberg’s burn-rate investment and conviction that Metaverse was the next big thing for Facebook.
So “certain”, he even renamed Facebook to Meta on 28 Oct 2021 and investors reacted by fleeing, causing the dip.
Less than 3 weeks later, on 30 Nov 2022, OpenAI introduced ChatGPT to the world and like they say, the rest is history.
Mr CEO “timely” embraced of artificial intelligence proved to be the saving grace that brought Meta back from the brink.
And there’s no looking back since as Meta continued to climb, peaking recently on 5 Jul 2024 at $539.91 per share.
It is interesting to note that Meta still commits to Metaverse; just that it’s no longer widely talked about by Mr CEO; for fear of reprisal (I guessed).
July 2024 last day.
Looking at the 3 Magnificent Seven (Tesla, Google and Microsoft) that have reported earnings, it seems like market is looking for corresponding revenue rewards on monies invested in artificial intelligence (AI).
When there are no significant returns, market became unsettled and down they went, so far.
Not unless Meta has a different strategy up its sleeves to thwart the worries, it may tracked down the same path like its fellow members.
- Do you think there is room for Meta to continue its vertical climb?
- Do you think (assume Q2 earnings exceeds forecast) euphoria in Meta’s earnings will be enough to lift US market out of the doldrum this week?
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Really wish but the market became bad again today
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Will it continue to dip this week? Quite likely.....