4 novembre 2022

Insights

Trading Meta Stock: Long or short?

Meta stock is falling again, and there are no telltale signs in the technicals or fundamental news releases to suggest which way Meta stock will go next. Zuckerberg is buying back stocks at a bargain price, but is he desperately trying to slow a terminal bleed using his personal wealth, or is he a savvy investor taking advantage of the moment? 

Meta stats

By Paul Reid - Managing Editor
By Paul Reid - Managing Editor

Compared to last year’s Q3, revenue is down 5% from $29 billion to $27 billion. The annual net income of the company also dropped from $9.1 billion to just $4.3 billion - a disturbing 50% fall. The all-time high of $353 per share, just over a year ago, is a far cry from today’s $99.

So what will the tech giant stock do next? And is now a good time to buy? Forecasting Meta stock is a troublesome affair, but there is one commonality that matches Meta’s price action rather accurately, but you won’t find it on any chart.

Meta’s vision of the future

It was just over a year ago that Mark Zuckerberg declared virtual reality the next frontier. But it seems the world doesn’t care if he’s building the Metaverse to advance all of humanity. The tech is clearly a step into the future. VR and AR can enhance social media, movies, business interactions, and gaming. A world-changing technology by all accounts.

Oculus sales are leading the field in VR headsets, with no competition worthy of mention. But that might all change soon. With the announcement that the next-gen headset will cost $1500, future Oculus 3 sales aren't likely to put Meta into a positive.

Yes, the latest tech release is lighter, more comfortable and convenient, and offers clearer vision than ever before, but the 500% price increase won’t help warm a market that is just not ready to put on the goggles yet.

And so, Reality Labs and the Metaverse will continue to add to company losses, which will further fuel the doubts of investors, who have already started to question Zuckerberg’s vision. Billions of dollars have been invested so far, and all people are talking about is that avatars now have legs.

It’s not the first time an innovation was rejected in its infancy. Henry Ford faced a similar problem with the noisy and smelly motor vehicle. People of the time said that the expensive invention didn’t improve on the horse and carriage, and the idea would never take off. Imagine a world without cars today.

Mobile phones, Bluetooth headphones, and WiFi also started on shaky ground, but the innovating companies (thankfully) persisted. And like them, Zuckerberg seems unwavering in his pursuit. Perhaps all Meta needs is a little time. Will the company survive long enough to see mass adoption, or will it take the Nokia road and only be remembered by the earliest adopters?

Until there’s an Oculus headset in every western household, Meta’s only lifeline is digital advertising revenue from Facebook, Instagram and WhatsApp, but things are not looking well for the Meta platforms either.

The Meta Platforms 

From privacy issues to data breaches, hardened restrictions on advertising continues to hit marketing revenues hard. Apple’s new privacy policies had a massive impact on Meta, but today’s economy is also weighing down on many industries, and their ad budgets are shrinking daily.

Healthcare and travel remain strong for now, but these categories are known as cyclicals or discretionaries. Discretionaries are goods and services considered non-essential and known to suffer during a downturn.

Gaming, eCommerce, and financial services have already lowered their advertising budgets. A crypto spring thaw is nowhere in sight, which was a very lucrative revenue source for Facebook during the trend/hype. If a recession really is around the corner, cyclicals will suffer, tighten their belts and ad budgets, and Facebook will be in very hot water.

Adding to the ad fallout is TikTok. Ads on TikTok were cheaper and got a far better reach. Yes, Facebook and Instagram responded with Reels and Shorts, but this only slowed the user exodus. Even with the 140 billion reels per day, a 50% increase from six months ago, the ad revenue is falling fast, and there are no other lifelines to speak of.

Trading Meta in 2022/2023

Zuckerberg is buying back stock at the new low prices of Q4 2022, but, judging by the trading volume, he’s one of the very few who see it as an opportunity to go long… at least for the moment. You might be tempted to buy low too, but that “long” order might turn out to be a very long trade indeed, since there’s nothing on the horizon that could move Meta higher with any significance.

Is there any indication or insight into Meta’s future and stock price? Overall sentiment surrounding Meta and Facebook is at an all-time low. Zuckerberg has one too many scandals in the closet, and practically any public announcement he makes quickly becomes a source of ridicule.

In fact, if you look at the Meta charts and compare them to Zuckerberg’s failing reputation, the parallel is astonishing. With every accusation of misconduct comes a new low for Meta stocks, and right now, nothing positive is on the cards for Zuckerberg, Facebook, Reality Labs, or Meta.

Meta shareholders might have some difficult times ahead of them if they don’t jump ship soon. Meanwhile, CFD traders who have the option to short stocks might just be looking at a virtual gold mine. 

Start digging, add deep analysis of Meta to your daily research. But remember, past performance is not a reliable indicator of future results. Who knows, perhaps Meta is keeping a game-changing secret locked away, waiting to surprise the world and its shareholders, so due diligence is, as always, recommended before hitting the buy or sell button.

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