Meta Platforms Stock Outperformed S&P500 Last Week, What To Expect?

Meta Platforms’ stock (NASDAQ NDAQ +1.1%: META) has lost 0.9% in the last week, outperforming the S&P 500 (down 3.2%). Further, the same trend was observed over the last ten days (-4.5% vs -7.1%).

The social media giant posted weak results in the second quarter of 2022. It reported a marginal decline in net revenues to $28.8 billion, mainly due to a drop in advertising revenues. Further, it provided revenue guidance of $26 – $28.5 billion for Q3, lower than the previous year’s figure. That said, the company is taking several measures to boost its business. It recently announced a partnership with JioMart in India, which will allow users to do online shopping using WhatsApp.

In addition to this, the recent media reports suggest that Meta is exploring new paid features for its family of social media apps. These updates were the main reason behind the stock movement.

Now, is META stock set to drop further, or could we expect some recovery? We believe that there is a 60% chance of a rise in META stock over the next month (21 trading days) based on our machine-learning analysis of trends in the stock price over the last ten years. See our analysis on Meta Platforms’ Stock Chance of Rise.

Twenty-One Day: META -6%, vs. S&P500 -5.3%; Underperformed market

(16% likelihood event; 60% probability of rise over next 21 days)

  • Meta Platforms FB +1% stock lost 6% over the last twenty-one trading days (one month), compared to a broader market (S&P500) decrease of 5.3%
  • A change of -6% or more over twenty-one trading days is a 16% likelihood event, which has occurred 397 times out of 2508 in the last ten years
  • Of these 397 instances, the stock has seen a positive movement over the next twenty-one trading days on 240 occasions
  • This points to a 60% probability for the stock rising over the next twenty-one trading days

Ten Day: META -4.5%, vs. S&P500 -7.1%; Outperformed market

(15% likelihood event; 59% probability of rise over next 10 days)

  • Meta Platforms stock decreased 4.5% over the last ten trading days (two weeks), compared to broader market (S&P500) loss of 7.1%
  • A change of -4.5% or more over ten trading days is a 15% likelihood event, which has occurred 364 times out of 2508 in the last ten years
  • Of these 364 instances, the stock has seen a positive movement over the next ten trading days on 214 occasions
  • This points to a 59% probability for the stock rising over the next ten trading days

Five Day: META -0.9%, vs. S&P500 -3.2%; Outperformed market

(33% likelihood event; 59% probability of rise over next five days)

  • Meta Platforms stock lost 0.9% over a five-day trading period ending 09/02/2022, compared to the broader market (S&P500) drop of 3.2%
  • A change of -0.9% or more over five trading days (one week) is a 33% likelihood event, which has occurred 821 times out of 2508 in the last ten years
  • Of these 821 instances, the stock has seen a positive movement over the next five trading days on 486 occasions
  • This points to a 59% probability for the stock rising over the next five trading days

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Source: Meta Platforms Stock Outperformed S&P500 Last Week, What To Expect?

Critics by By Jacob Sonenshine

Big Tech stocks are still expensive, despite all the market’s down times this year. And that’s key for the S&P 500. Now, the giants— Apple (ticker: AAPL) and Alphabet (GOOGL) are two examples—haven’t walked away untouched. They’ve gotten caught in the selloff just like the rest of the S&P 500, which is down about16% from its early January all-time high.

The market just hasn’t been able to shake off two big worries—the Russia-Ukraine war and a recession triggered by the Federal Reserve, desperate to bring down inflation with higher interest rates. Still, comparatively speaking, Big Tech is expensive. Those names are simply more richly valued than the tried-and-trues of other industries— Ford (F), for example, or Pfizer (PFE).

The key metric is the earnings multiple. Apple and Alphabet—along with Microsoft (MSFT), (AMZN), Meta Platforms (META), Tesla (TSLA), and Nvidia (NVDA)—trade at an average forward earnings multiple of about 38 times. And that’s just below the sub-17 times aggregate multiple for the S&P 500. 

Big Tech has been able to pull a rabbit out the hat because of its bright future: relatively fast profit growth. Amazon’s dominance in e-commerce, for example, lets it keep taking market share from bricks-and-mortar retailers—and even other online sellers. Tesla remains the leader in electric vehicles, which are displacing gas-fueled vehicles. Nvidia is entering a brand-new metaverse business, which adds new opportunities.

Analysts expect these three—the fastest-growing of the seven Big Tech names—to see earnings per share compound by at least 20% annually for the next three years, according to FactSet. The upshot: The multiples of these stocks will stay high. And that’s key for the S&P 500 because high multiples for Big Tech keeps the index’s aggregate multiple—and consequently its price level—elevated.

The index is market cap-weighted, which means companies with higher market capitalizations have more influence on the index’s level. The combined market cap for the seven tech names is roughly $8.8 trillion—just over a quarter of the index’s total market value. What investors should realize—or remember—is that if Big Tech multiples sink fast so will the stock prices—and the lower prices would drag down the S&P 500. 

Now, Big Tech multiples will come down rapidly if the growth expectations of their businesses slow down quickly.  Netflix (NFLX) knows. The streaming platform has essentially dropped out of the Big Tech group, with a mere $100 billion market cap. The growth of entertainment steaming is slowing and Netflix’s forward earnings multiple fell just below 17 times for a moment this year, down over 20 times.

Meta Platforms knows, too. The tech giant revealed slowing advertising growth on its last earnings report. Today, the stock trades at about 15 times earnings, down from—again—over 20 times. “It takes a monumental blowup like Meta/Facebook …to crack valuations,” wrote Jessica Rabe, co-founder of DataTrek. 

The soundest advice is to focus on the long haul. As a company’s growth slows, its multiple should decline gradually—not all at once. That’s already happening: Microsoft’s current 24.7 times multiple is down from a pandemic-era peak of 34 times.  An orderly decline in Big Tech multiples could allow the rest of the market to gain over the years as companies across the board, including Big Tech, still grow their earnings streams. 


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