Meta stock is on a roll. Its shares give off a key bullish signal as the market cheers its efforts on augmented reality and generative artificial intelligence. But investors could miss Meta's meteoric rise — proving the old trader's adage: you can be right on your thesis but wrong on your timing.
Developer Conference Raises Hopes
The social media giant this week is gearing up for Meta Connect 2023, its annual developer's conference. Meta will likely explain its efforts in virtual reality, augmented reality and generative artificial intelligence. Analysts have been bullish on the potential for good news. Citi cites strength in the advertising market in a research note and Loop Capital expects consumer-facing applications of generative AI.
But market action has recently cast a pall over investors worried about market cycles in general. And the Fed's renewed hawkishness in fighting inflation makes investors nervous. Irusha Peiris, O'Neil Global Advisors portfolio manager, joins Investor's Business Daily's "Investing with IBD" podcast, saying an uncooperative market doesn't mean underestimating certain plays like Meta stock. He says in 2003, although markets were consumed with news about the U.S. invasion of Iraq, stocks like Amazon, Yahoo! and a company called Netflix saw their shares break out.
Audio Version Of Podcast Episode
"Mentally, it's hard to imagine that the markets can ever go up again when all you see is just stocks not working for that time period," Peiris said.
Meta Stock Stays The Course
Meta stock was mauled by the market in October last year. Shares plunged to a 52-week low 88.09 after CEO Mark Zuckerberg doubled down on his company's commitment to the metaverse during a quarterly earnings call. Analysts raised concerns over increasing development costs. The company was simultaneously spending money on efforts in the metaverse and in artificial intelligence.
"There were very few people talking about it at that point," Peiris said. "Let's be honest — how many people get excited about a stock that's dropped from almost 400 down below 100?"
But Peiris says one indicator that separates stocks with potential is the stock's relative strength. "You want to know what stocks are outperforming the market, the relative strength is the best way to do that," he said
In November, Meta stock bottomed, began forming a three-weeks-tight pattern and rose as hype around artificial intelligence grew.
The stock has entered a stage two cup-with-handle trade pattern over 40 days and has a Relative Strength Rating of 98. The traditional handle buy point is at 312.87.
Peiris explains Meta's current price action in detail during this week's podcast episode.
Meta stock has an IBD Composite Rating of 98, according to IBD Stock Checkup, and ranks first in the internet content group, according to IBD Research.
Watch for a key catalyst to push Meta stock into a powerful breakout, Peiris said. "When you have so many stocks that have fallen apart to a large degree, it's these stocks that we've been talking about, they're the ones that are holding up."
Check out this week's podcast episode for more investing insights.
