Despite notching a fresh all-time high less than a month ago, it’s been a tough couple of weeks for shares of Meta Platforms (NASDAQ: META). The tech giant was already starting to see its shares soften in the second half of April as the broader market began selling off, but they took an even bigger dip last week.
The main catalyst was the company’s Q1 earnings, which, despite topping analyst expectations for both topline revenue and bottom line earnings, disappointed investors. The stock gapped down as much as 15% the day after, but there the selling stopped. Meta shares are already consolidating and there are several reasons to think we could be looking at a golden buying opportunity right now. Here are the top 3.
Strong Fundamentals for Meta
[content-module:CompanyOverview|NASDAQ:META]First up is Meta’s fundamentals. While investors were hoping for more in the company’s latest report last week, there’s no escaping from the fact that Meta crushed expectations for their Q1 revenue and earnings. It was the second highest revenue print ever, after Q4’s, and CEO Mark Zuckerberg spoke bullishly on the company’s advances to build “the world’s leading artificial intelligence.”
While investors were justifiably spooked by light forward guidance, it’s fair to say this was quickly priced into the shares with the 15% drop. Remember, this is still a $1 trillion company reporting more than 25% revenue growth. Having now had a few more days to digest the news, the sideways consolidation and inability of the bears to bring the shares down any further suggest Wall Street has gotten over it.
Analyst Ratings for Meta
Watching for what stocks analysts are coming out bullish on is one of the easiest ways to spot quality names amongst all the noise. This is especially true for those they give juicy price targets to. The past week has seen a host of analysts reiterating their Buy or Outperform ratings on Meta shares, and while most also trimmed their price targets, they’re still going to be very tempting.
Take Loop Capital, for example, which reiterated its Buy rating on Meta shares yesterday while giving it a fresh price target of $550. From the $440 that Meta shares closed at on Wednesday night, that’s still pointing to a near-term upside of some 25%.
In the past week alone, Loop Capital’s bullish stance joined that of the teams from Citigroup, Truist Financial, TD Cowen, and Royal Bank of Canada, to name just a few. While the latter trimmed its price target back from the $600 it was at before earnings, it was only brought down to $570, a full 30% higher than where shares are currently trading.
Technical Setup for Meta
So, with the company’s fundamentals still performing well and many analysts calling the stock a solid buy, the final reason to get excited is the technical setup. We’ve already seen how Meta’s shares are starting to trade sideways as they consolidate, which is exactly what you want to see with a stock that’s taken a sudden plunge.
The other technical factor in the stock’s favor is its relative strength index (RSI). The RSI looks at a given stock's recent trading and spits out a number between 0 and 100. Anything above 70 suggests the stock is heavily overbought and due for a pullback, while anything around 30 or below indicates the opposite.
With an RSI of 33, which was even lower at 29 earlier this week, it’s fair to say Meta is heavily extended. Don’t be surprised to see the momentum swing heavily to the buyer’s side ahead of the weekend. This would be a solid signal to watch for ahead of any recovery rally, which, based on the reasons above, is certainly on the cards.
