Facebook parent Meta plunges 20% as earnings forecast miss the Mark

Facebook parent, Meta Platforms Inc, has joined the likes of Peloton, Tesla, Netflix, Paypal and Spotify to be punished by investors this reporting season for lackluster earnings and frothy valuations.

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Meta is investing heavily in the “metaverse,” a virtual world where the internet is bought to life in 3D. However, Meta relies on adverting dollars and new users to drive revenue in the meantime.

A combination of higher costs, increased competition, weaker revenue forecasts, and no growth in new users in the fourth quarter, enough to panic investors.

The share price of Meta is trading over 20% lower, near $250 in the aftermarket, indicating that over $150 billion will be wiped from the company’s market capitalization when the stock resumes full trading.

The earnings miss compounds the woes of Meta shareholders, who have seen the stock price fall from record highs in recent months as the company fights regulatory battles on several fronts. And as Chief Executive, Mark Zuckerberg leads the company into the unchartered waters of the Metaverse.

Furthermore, the tech sector has fallen out of favour in recent months as higher interest rates undermine the value of future cash flows from growth stocks. This is best illustrated by a 17% fall in the tech-heavy Nasdaq Index in the first four weeks of 2022.

Meta Share Price Chart

Presuming the share price of Meta opens tonight near where it is trading currently (at $250), it will be trading below a layer of support now resistance at $290/300. The share price needs to rebound above this level to avoid a deeper retracement.

On the downside, support is viewed between $244/$231, which encapsulates horizontal support, and the 61.% Fibonacci retracement from the Covid $137.10 low to the September 2021, $384.33 high.

Meta Daily Chart 3rd of Feb

Source Tradingview. The figures stated areas of February 3rd, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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