To The Moon

Hello everyone,

In this edition of Yield Hunting, we're spotlighting Meta—a stock with serious earth-sign energy. Since December 2022, its upward trend has been as steady and reliable as a calm capybara. There's something about its price trajectory that gives investors a peculiar sense of security. But the question is, how long can this sense of safety last?

Let’s break it down.

Fundamentals

If we were to isolate the purest catalyst behind Meta's surge over the past year, it would undoubtedly be AI. This field, brimming with imagination and potential, has remained a hot topic ever since the industry-defining launch of ChatGPT. AI's momentum has shown no signs of waning, continuing to fuel narratives and investment interest.

Data Insights

As of 2024, Meta’s stock has gained approximately 59% year-to-date, compared to the Nasdaq’s 40% gain over the same period. Not only has Meta outperformed the index, but its price trajectory has also been significantly more appealing. While the Nasdaq saw a downtrend between December 2022 and October 2023, Meta’s stock steadily climbed, demonstrating resilience and growth.

AI Investment

Meta has consistently emphasized its substantial investment in AI infrastructure in its financial reports. In 2024, the company allocated a staggering $30 billion for AI research and development, making up over 50% of its total R&D budget. This increasing commitment to AI R&D is a crucial factor underpinning Meta’s stock performance, allowing it to ride the ongoing AI boom.

This combination of robust fundamentals, strong performance data, and forward-looking investment creates a compelling case for Meta’s continued growth. But how long can this momentum last? Let’s explore further.

Technical Analysis

Looking at the technicals:

• The 60-day moving average (MA), a reliable indicator of the long-term trend, is still on an upward trajectory, signaling that the overall uptrend remains intact.

• However, the shorter-term MAs—MA5, MA10, and MA20—are gradually curving downward and converging toward the 60-day MA. This indicates a slowdown in upward momentum, as the pace of price increases has decelerated.

Key Observations

• After hitting an all-time high of $602.95 in October, the stock has been in a consolidation phase for nearly two months. This stagnation reflects a market waiting for new catalysts or clearer signals.

• The critical question now is whether this is a healthy consolidation before another breakout above recent highs or a sign of a potential trend reversal.

The outlook remains uncertain, and the next direction will depend heavily on whether buying interest resurfaces to push the stock above its consolidation range. For now, caution and close monitoring of price action are advised.

The current uptrend remains intact, with the key focus now on whether the 60-day moving average can provide strong support. From a technical perspective, the future price movement is uncertain, but the fundamentals offer solid backing.

As for the FCN linked to Meta, the annualized coupon rate for a 3-month term is 19.13%. While this rate isn’t particularly high compared to previous offerings, Meta’s risk-reward ratio stands out. Beyond the solid support of the 60-day moving average, the expansive prospects of AI provide robust fundamental backing. Additionally, a 95% strike price ratio offers a sufficient margin of safety for a stock with a strong long-term uptrend.