Meta Platforms is the IBD Stock of the Day for Monday. Shares of the Facebook parent company have formed a flat base pattern after bouncing back last week from a slight earnings letdown.
Meta stock has traded between a high of 602.95 — its flat base buy point, according to MarketSurge — and 555 since early October. In that time, the Mark Zuckerberg-led company saw its stock fall slightly following third-quarter earnings, and then again in the day following Donald Trump's election to a second presidential term.
Investors are debating what impact Trump's policies will have on the stock, but are also keyed in on how much further Zuckerberg plans to splurge on artificial intelligence initiatives.
On the stock market today, Meta stock slipped 1% to close at 583.17. Shares have gained 65% this year, compared to a 26% gain for the S&P 500.
Meta Stock Left Out Of Initial Trump Rally
Meta stock posted a 4% gain in last week's trading, despite not trading higher with the rest of the market Wednesday following Trump's victory. While the S&P 500 index rallied 2.5% on Wednesday following Trump's victory, Meta stock closed slightly lower on the day.
Trump's election introduces an even bigger question mark for whether Meta rival TikTok will be banned. Trump said he was against the idea, prior to President Joe Biden signing a bill into law this spring requiring TikTok parent company ByteDance to sell the company by early next year.
"There's a lot of good and there's a lot of bad with TikTok," Trump said in a March interview with CNBC. "But the thing I don't like is that without TikTok, you can make Facebook bigger and I consider Facebook to be an enemy of the people along with a lot of the media."
Analysts generally saw the TikTok ban as a positive for Meta and Snapchat parent Snap, which both have short video products that compete against TikTok for user attention.
Still, Stifel analyst Mark Kelley wrote to clients last week that "social media fundamentals are unlikely to change from here, given we don't believe many investors were expecting a TikTok ban."
Trump's election is also likely to bring a lighter regulatory and antitrust enforcement environment, Kelley noted, and could prove neutral for Meta overall. Kelley rates Meta a buy.
Investors may have ultimately taken that view. Meta stock followed a weak trading day after the election with a 3.4% gain Thursday.
Meta Earnings
Last week's gains helped Meta bounce back from a down trading week to close October. Meta on Oct. 30 posted Q3 results that cruised past top and bottom line estimates. Earnings gained 37% year over year to $6.03 per share. Sales increased 19% to $40.6 billion,
But Meta stock fell 4% in next-day trading, however, as the stock bumped up against high expectations. The stock lost 1% for the trading week ending Nov. 1.
In its Q3 report, Meta also slightly increased the midpoint of its guidance for 2024 capital expenditures by $1 billion, to $39 billion. Much of that spending is focused on building data centers and other infrastructure to power new AI products.
During a call with analysts on Oct. 30, Zuckerberg said there are several opportunities to use AI to improve Meta's core business, and therefore it's worth further investment.
A key investor debate is just how much Meta will spend on capital expenditures in 2025. The company has yet to release an estimate but said in its Q3 news release that it expects "significant capital expenditures growth in 2025."
Analysts are forecasting $49.5 billion in capital expenditures for next year, according to FactSet, which would mark a 27% jump from Meta's expected 2024 spending.
New Street Research analyst Dan Salmon said Meta stock could be "range-bound" for the next three months until the company provides guidance on 2025 capital expenditures and overall expenses.
Meta Stock Forms Flat Base
Meta stock's 4% gain last week helped shares rebound above its 10-week line and retake its 21-day moving average. The gains helped the Facebook and Instagram parent form a new flat, base-on-base pattern with a 602.95 buy point.
A high of 594.80 reached last Thursday could also offer an early entry for more aggressive investors.
Meanwhile, Meta's Relative Strength line is below a recent high but remains above 85 out of a best-possible 99, a sign of continuing bullishness compared to the rest of the market.
Meta stock shows a 96 out of a best-possible 99 IBD Composite Rating, according to the IBD Stock Checkup tool. It is the top-rated stock in the Internet Content group tracked by IBD.
