Source: PaxForex Premium Analytics Portal, Fundamental Insight
Meta Platforms has been facing a challenging period, marked by a significant drop in share prices since reaching an all-time high of $382 in 2021. Despite a recent recovery, most investors remain cautious about the company's future prospects. Meta's advertising business, which was once the company's main revenue source, has been struggling to maintain its former success, with weaker performance in each quarter of 2022 except for the first. This has put significant pressure on Meta's profitability, leading to a 41% decline in net income to $23.2 billion in 2022. The company attributes its poor performance to a weak economy, competition, and the negative impact of Apple's iOS user tracking policy changes.
One favorable factor is that Meta's family of apps, including Facebook, Messenger, WhatsApp, and Instagram, experienced growth in engagement throughout 2022, with a total number of daily active users reaching 2.96 billion, and Facebook's daily active users reaching 2 billion. This suggests that Meta is still relevant, particularly with the growing popularity of its Reels short video service.
To improve efficiency and profitability, Meta is focusing on cost-cutting measures in 2023, including reducing its workforce by 11,000 and restructuring or terminating leases on various buildings. However, the company's recent bet on the metaverse has raised some concerns among investors. Meta is investing heavily in this burgeoning industry, spending $10.2 billion in 2021 and another $13.7 billion in 2022. However, the Reality Labs metaverse business showed a slight decline in revenues in 2022, indicating that Meta devices may be struggling to gain mass distribution beyond early adopters. Moreover, given the challenges facing the advertising business, some investors question the wisdom of spending so much on the metaverse.
While many major companies are optimistic about the metaverse's potential to generate significant revenue, the industry would have to reach mass distribution to achieve such numbers. Additionally, even if the metaverse gains mainstream adoption, it may take longer than expected, resulting in a lower return on investment for Meta.
In conclusion, there are too many uncertainties for most investors to feel comfortable with Meta's current situation. The company's advertising business is under pressure, and its new venture is still burning through cash while posting low 2022 figures. However, for investors with a high tolerance for volatility, taking a small position in Meta stock could be an option if they believe that the advertising business will recover and grow over the long term, and that the metaverse business will generate significant revenue in the future.
As long as the price is above 167.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 184.52
- Take Profit 1: 197.00
- Take Profit 2: 215.00
Alternative scenario:
If the level of 167.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 167.00
- Take Profit 1: 154.00
- Take Profit 2: 145.00
