Meta Pre-Earnings Analysis

$META Earnings Analysis:

Meta is expected to report earnings this week and analysts are very aggressive as they expect third quarter earnings to come in at 3.62 per share vs last year’s 1.64. The significant jump in projections is largely due to the 25% jump in ad revenue expectations. META has topped earnings every quarter this year so far, but this quarter’s expectations are notably higher so it may have difficulty achieving them. Apart from their performance this quarter, analysts are also watching for updates about the metaverse project that has costed the company billions, as well as what Meta’s plan is for 2024 as Apple’s regulations become more of a barrier to their advertising and data collection. 

Technical analysis:

Investors in META have had a good year as the company moved from a low of $88.00 to a high of $330.00 in the past 12 months, most of the move was attributed to strong earnings, but can they do it again? The stock has stayed in the same range or a few months now, unable to breakout in either direction, so earnings will likely be the catalyst to move it. META has gapped up on every earning it has had in 2023 so another gap up may not happen, instead the company may report good news and rally over the several weeks that follow. Keep note that the gap ups they posted from their previous earnings will need to get filled down at some point so META definitely also has room to the downside, which may happen further into 2024 when Apple’s regulations become a problem for them. 

Option chain analysis:

Open interest on META’s option chain is leaning bullish, with many of the in the money contracts trading upwards of 3,000 in open interest while in the money puts have about 1800 as the highest open interest. Buyers have refused to let go of the highs META is holding despite the market pull back we’ve seen so there’s definitely more bullish activity. META’s target if it can break above its 52 week highs on a strong report is 350.00, so consider the 11/17/2023 350C if looking at a bullish play but note that is an expensive contract. You can always choose a closer expiration, but the closer the higher risk it becomes. If META misses earnings, its first downside target is 285.00, but a real bad report could send them even further to 245.00. The 285P 11/17/2023 is a good contract, but also a bit expensive.