Facebook's parent company, Meta Platforms (META) -) has been one of the stock markets' best performers in 2023. Following a dismal showing in 2022, Meta Platforms shares found their footing last fall. Since then, shares have surged 250%, likely taking even Mark Zuckerberg's most ardent fans by surprise.
The FAANG stock came into the year weighed down by a multibillion dollar failure to pivot the company toward the metaverse. It also faced sky high labor costs because of a Covid-era hiring spree, and the prospect of lower ad revenues due to economic uncertainty.
Few expected the stock's pace-setting recovery this year, but Real Money's Bruce Kamich was one of them. He wrote in April that Meta Platform's could continue higher to $261, and in July, he predicted its share price could climb to $340.
Shares handily achieved his first target and while they didn't quite get to $340, they got pretty close, hitting $330 in early October.
What's likely to happen next to the social media Goliath's stock price? Kamich recently updated his analysis, including issuing a new price target that's likely to raise eyebrows.
Meta Platform's profits pick up
Meta Platforms doesn't only own Facebook. Its family of apps also includes Instagram, WhatsApp, and, recently, Threads. Those apps boast millions of active daily users, making the company one of America's most influential technology titans.
Related: Why Mark Zuckerberg and Jeff Bezos could be smarter than Elon Musk
Most of the company's revenue comes from advertising that's sold on its sites. During the post-Covid easy-money period, surging ad revenue provided Mark Zuckerberg with plenty of financial firepower to spend on projects and people.
That changed early last year.
Supply chain disruptions caused GDP to turn negative in Q1 and Q2, rising interest rates increased economic uncertainty, causing advertisers to cut budgets, and a soaring dollar crimped results overseas.
As a result, Meta Platforms posted six consecutive quarters of year-over-year earnings declines, a trend that forced Zuckerberg to reduce costs to get the company back on track.
He significantly cut metaverse spending after the Reality Labs division responsible for developing it lost billions of dollars and he laid-off thousands of workers.
Zuckerberg's cost-cutting plan has been a boon to the bottom line. Earnings skyrocketed 31% year-over-year to $3.23 per share in the second quarter as sales rose 11% to $32 billion.
Meta Platforms will release its third quarter performance on Oct. 25, but analysts estimate earnings will be $3.63 per share, up from $3.06 per share 90 days ago. Earnings were just $1.64 per share in the same quarter last year, suggesting profits may have more than doubled.
Meta Platforms charts reveal new price target
Technical analysis offers valuable insight into the sentiment of all market participants, including large mutual and hedge funds with access to resources unavailable to Main Street investors.
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Kamich's used technical analysis to help professional investors for over 50 years. His bullish outlook for Meta Platforms earlier this year was based on his analysis of price and volume trends.
With third quarter earnings approaching, Kamich reviewed Meta Platforms charts for clues to whether shares will likely continue climbing. He also calculated a new price target based on a daily point and figure chart. Unfortunately for Meta Platforms shareholders, Kamich isn't impressed by what he saw.
"I can see that prices have two recent candles with noticeable upper shadows. It does not look bearish on a bar chart but the candle chart is telling us that traders are rejecting the highs," wrote Kamich. "Trading volume has been shrinking and the weekly OBV [on-balance volume] line looks like it is making a slow turn to the downside. The MACD [Moving average convergence divergence] crossed to the downside in early August for a take profit sell signal.
On-balance volume is essentially a running total of up minus down day volume. MACD is a momentum indicator. It subtracts the 26-day exponential moving average (EMA) prices from the 12-day EMA. A bullish or bearish signal triggers when that result crosses over or below zero, or the 9-day EMA.
Ideally, Kamich wants to see rising on-balance volume to suggest buyers are more aggressive than sellers, and a positive MACD suggesting momentum is bullish not bearish.
Unfortunately, that's no longer the case for Meta Platforms, leading Kamich to conclude, "Shares of META are showing their age. Traders need to take profits on META longs and prepare for a decline in the weeks and months ahead."
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