Formerly known as just Facebook, Meta undefined stock has been getting its clock cleaned over the past few weeks.
When the company reported earnings after the close on Feb. 2, it was immediately met by sellers. That’s despite some of the bullish responses we saw in other FAANG stocks, like Amazon (AMZN) - Get Free Report and Alphabet (GOOG) - Get Free Report (GOOGL) - Get Free Report.
Meta shares fell more than 26% in the next session as investors digested the report.
The news even weighed on Pinterest (PINS) - Get Free Report and Snap (SNAP) - Get Free Report, the latter of which fell 23.6% ahead of its own earnings report a day later (then surged almost 60% in a single session after reporting better-than-expected results).
As for Meta, the stock has traded lower for six straight weeks and in 11 of the past 13 sessions.
The stock is now down 40% from the Feb. 2 high and roughly 48% from the all-time high made on Sept. 1.
Trading Meta Stock
At this point, it comes to growth vs. valuation. Revenue is forecast to grow double-digit percentages both this year and next year. However, earnings are forecast to fall about 10%.
Despite that, shares trade at just 16 times 2022 earnings estimates — a lower valuation than the overall market.
For a premier social media platform with a fortress balance sheet and billions of users, bulls are beginning to feel this is too cheap to ignore. If that’s the case, the recent 40% haircut can be used to one’s advantage.
“When is enough, enough?”
That’s a question many investors have been asking themselves and it's one they have to be careful with. All one has to do is look at growth stocks to know that it can always get worse.
When I first look at the weekly chart for Meta, it looks like the selling pressure could be exhausting itself. When I look at the daily chart, Tuesday’s action gave us an indecision day (interpreted via the doji candle).
What I want to see from here is pretty simple: A daily-doji-up over $207.50.
If that were to happen — and preferably in conjunction with a rebound in the Nasdaq — we could see a quick push up to the $215 to $218 area and the declining 10-day moving average.
Near the latter is also a big breakout level from the past few years.
Above this zone puts $225 in play, followed by $235 and the declining 21-day moving average.
On the downside, $200 has been key lately. A close below that level may have short-term bulls hitting the exits and I can’t blame them. If we’re near a low though, the current charts could lead to a great risk/reward setup.