Is Meta Stock Price (NASDAQ: META) Getting Set To Break Out, Or Break Down?

It will come of no surprise to read that Meta Platforms (NASDAQ: META) has established itself as one of the most dominant forces globally, even in an industry as dynamic and evolutionary as tech. Since early 2023, it appeared that gains in the stock market for firms such as Meta were inevitable. The bullish momentum was such that it almost seemed like you could pick out an AI stock, or a tech company, and wherever you stuck your pin you might see gains.

In the case of Meta’s stock price, gains of more than 50% since the start of 2024, and just under 200% over the past 5 years would indicate a company on the ascent. Those with long-term horizons might even take further solace in looking at the 10 year return, where the stock has gained more than 600%.

The recent pullback on US recession fears have made some participants take a closer look at what they are adding to their portfolios, and taking profits off the table in others. Meta was not immune to that, with a 15% retracement from the high to low within that week, before the recent revival. Where now then for a stock which has been an outperformer, a breakout, or a break down? We take a quick look at the stock from a technical, and fundamental standpoint.

Looking at the chart, technically we are a point where there could be various patterns playing out, but each has a very different outlook. On the 6 month here, there are shades of a double top, where Meta has previously met resistance and taken a turn. Adjust the chart down to the 1 month, or the 5 day, and you might see the head and shoulders looking like it wants to form. Both of these patterns would be bearish, and should there be a downturn in price, those looking at technical patterns would be quick to identify at the confirmation zones.

If you look at the 2 year chart however, the perspective could be quite different. A bull flag is also shaping up nicely, and would, as the name suggests be bullish if a breakout of range can be made. This is why within the realms of technical analysis, and chart patterns, that it is essential you look at various time frames; and ideally those that align with your desired hold period, or trading plan.

Charts are just one part of the picture however, and many do not follow technical analysis at all, particularly when it comes to longer term investment plays. The fundamentals of the business, the outlook for growth, and the sector sentiment can all play a much greater role in the direction that a company will take.

What Of The Fundamentals?

The tech giant, primarily recognised for its suite of social media applications, commands an impressive market capitalisation of approximately $1.34 trillion. Over the past twelve months, Meta has generated a staggering $150 billion in revenue, cementing its status as a financial powerhouse.

The company’s financial health is further underscored by its robust operating margin of 38%. Breaking this down, the family of apps segment, which includes popular platforms like Facebook, Instagram, and WhatsApp, boasts an even higher operating margin of 50%. These numbers are indicative of Meta’s efficiency at converting revenue into profit, an essential metric for investors.

Looking ahead, Meta Platforms shows no sign of slowing down its quest for innovation, particularly in the field of artificial intelligence (AI). The company has been investing heavily in AI-driven projects, including Meta AI. This initiative has already yielded promising tools like a chatbot assistant capable of a multitude of tasks, including generating creative images.

Aside from its technological advancements, one of Meta’s core strengths is its network effect. With daily active users across its apps tallying at 3.27 billion people, the platform offers unparalleled engagement opportunities for advertisers, translating into a lucrative revenue stream for the company.

At the helm of Meta is founder and CEO Mark Zuckerberg, whose leadership strategy has centered around maximizing shareholder returns. This strategic focus has manifested in the company’s commitment to stock buybacks and paying dividends, both practices that can enhance investor wealth.

Despite its strong performance and optimistic growth projections, Meta Platforms trades at a forward price-to-earnings ratio of 24.4. Experts anticipate the company’s earnings per share (EPS) to grow at an average of 23% annually from 2023 to 2026, suggesting that the stock remains attractive for growth-oriented investors.

Meta Platforms remains a formidable entity in the tech sector, propelled by strategic investments, technological innovation, and a robust user base. Where the stock goes from here is open to much interpretation, and whichever way you choose to evaluate, just make sure you use appropriate risk management and position sizing.