Meta Platforms
Meta (META) shares got hit right out of the gate this morning as the stock is trading 13% lower after beating their earnings estimates last night.
The report showed that they beat earnings per share (EPS) expectations by $0.39 on in-line revenue for the quarter. Furthermore, the company guided the next quarter’s revenue in line with the market’s expectations.
The reason that the stock is being punished by $62 per share is the return of higher spending.
Looking forward, management moved their fiscal year 2024 capex guidance to $35-$40 billion from $30-$37 billion. In addition, the company guided other expenses higher based on higher infrastructure and legal costs.
The increased expenses signal that CEO Mark Zuckerberg is calling an end to the "year of efficiency." He is apparently shifting the company back into the aggressive spending machine that sunk the stock in the second half of 2021 and into 2022 as the company made a deep dive into developing the Metaverse.
The charts for Meta remain long- and intermediate-term bullish as the stock is trading above its 200-day moving average, which sits at $375 ready to provide support.
From a shorter-term perspective, keep an eye on the $400 level, as this is where the stock sat before their last earnings report. That report shot the stock higher from $400 to $475 in one day. The market will like that $400 round number AND the fact that this would be considered “closing the gap” from last quarter’s report.
Expect that it will take another quarter or two for “Zuck” to get long-term investors to shake off their PTSD feeling of chains the Metaverse with higher expenses again.
Snap
Shares of Snap (SNAP) are seeing increased volatility and selling ahead of their earnings report after today’s close.
Shares of the social media company are trading lower along with others in the group in sympathy with Meta, but there’s more on the line for SNAP shares.
Last quarter, the company hit their EPS mark again but missed their revenue as the advertising model has been proving less effective than other social media companies, specifically Meta.
The stock dropped more than 30% following the results and has spent the last three months trading in a tight range between $11 and $12.
Tonight’s earnings report puts SNAP shares in the hot seat.
Meta’s quarterly results showed a doubling of advertising revenue on the success of its AI-powered tools. SNAP has a higher bar of comparison, which is one of the reasons the stock was punished last quarter.
Wall Street analysts have been downgrading the stock over the last quarter, a move that puts the stock on the defensive
With shares sitting above the critical $10 level, tonight’s response to an average or below average earnings report will see the stock quickly break that psychological level and likely make a fast and aggressive move to $8.
Amazon
Amazon (AMZN) shares are trading more than 2% lower ahead of their earnings to be reported after today’s close. The move is a sign that investors are getting more nervous about the wave of large-cap earnings that will land on the market over the next week.
The selling pressure moves Amazon shares below their 50-day moving average, a technical support level that the stock has spent the last week trying to stay above.
That follows a recent break below the stock’s shorter-term 20-day moving average, what I refer to as the “Trader’s Trendline.”
From a technical perspective, the move below both trendlines within a short period indicates that market momentum is turning negative on the stock ahead of its report. That move alone shifts the risk/reward scenario in favor of the bears.
It is also notable that the stock was recently rejected at its all-time highs of $190. This was also the top for the stock in 2021, so some psychological selling appears to be in play on Amazon ahead of the report.
The analyst community is extremely bullish on the stock with 59 out of the 61 analysts covering the stock rating it a Buy or Strong Buy. The current price target for the stock sits at $210, about 20% higher than current prices.
The Street’s current target for this quarter’s revenue is 142.65 billion, which would be a 14% year-over-year increase - better than last quarter’s 13.9% increase. That’s the number I’m watching as the market is becoming more sensitive to revenue figures as the earnings season moves forward.
The short-term chart suggests that Amazon has a downside target of $150 after any earnings disappointment and an upside target of $200 then $225 on a solid beat.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.