META Pre-earnings Analysis


Chart done on hourly timeframe. Meta shares will be tested this week as the company gets ready to roll out their fourth quarter earnings results. Analysts are extremely optimistic about the numbers, more than doubling their expectations from same quarter last year. Over the last four quarters, Meta has managed to surpass quarterly projections, which has helped the stock make a massive recovery in 2023. Now that it is trading at all time highs and an expensive price to earnings ratio of 35, these earnings will likely make or break the next quarter for the stock. Profitability has to increase for the price to earnings ratio to adjust, or else the stock’s price will have to decrease to correct the valuation. 

Looking at their income statement and balance sheet, the company has definitely earned the $1 trillion market cap it recently achieved. Revenue and profits have grown, but more importantly, the money is being managed well. Leaders at Meta have managed to grow the balance sheet to a strong 3:1 ratio between assets and liabilities. Free cash flow has also grown to 37.58B, leaving them with plenty of cash in their reserves to buyout competition, increase R&D spending, and withstand unexpected events. 

Option chain analysis:

Meta’s option chain for the week ahead is reflecting an implied volatility of 83%, which translates to about a $28 move. Since expectations are so high already, if META can meet them then we see the stock heading deeper into the 400.00+ level on these earnings. If they miss, then it could finally be time for a correction.