Meta’s share price: what to expect from Q3 results

When is Meta’s results date?

Meta Platforms, the social media and tech conglomerate, is expected to report earnings on Wednesday, October 26, after the market close.

Meta share price: forecasts from Q3 results

The Meta share price has moved with a market cap roughly a third off the trillion dollar mark it enjoyed prior, and year-to-date amongst the worst performing of the S&P 500 companies. The hope is it won’t be a repeat of its second-quarter results where it missed on earnings per share and slightly on revenue, but a clear drop in revenue forecasts for the third quarter. A stronger dollar isn’t a plus either where international revenue is concerned.

It’s been a tough year where competition seems to have only intensified with TikTok, the 'very effective competitor' according to Meta’s CEO Mark Zuckerberg, the clear standout not only expected to eat into its share but putting the shift with Reels into focus in terms of whether monetization has improved, and Apple’s privacy changes prior – which Meta and Snap relied on and more heavily impacted than say Alphabet – only ensuring the expected drop in revenue.

Advertising is cyclical, and there have been warnings prior from both Meta’s CEO (the 'economic downturn will have a broad impact on the digital advertising business) and others in the industry that advertisers have been reducing spending, and in turn, expectations will have to be lowered and mean even if active users rise (as was the case for the second quarter) signifying improved engagement, doesn’t guarantee it won’t avoid a drop in the average price per ad.

There’s also the matter of what projects might get cut with the pullback in earnings, with a hiring freeze already in place for most teams.

Both focus and future are on the metaverse, but it’ll be a costly venture that in the short-term won’t boost its coffers, its CEO hoping it’ll reach a 'billion people' and entail 'hundreds of billions of dollars' worth of digital goods, with a recent unveiling of a new headset that’ll be available next week.

The report from Wall Street Journal regarding Meta’s flagship metaverse called Horizon Worlds hasn’t been as rosy in terms of the company’s own expectations. That’s when it comes to growth, as for now, investors aren’t viewing it as such, with a P/E (price to earnings) ratio less than half what it was only a year ago.

Putting it all together, expectations are for its earnings per share to suffer a drop to $1.9 from $2.46 last quarter, a figure that’s been revised lower from what was $2.7 a few months back. Revenue is estimated at $27.45bn.

As for the collection of analyst recommendations, it remains majority buy amongst them at these levels with a minority holding, and an even tinier one ‘underperform’ and ‘sell’. And the average price target is well above current price targets (though has been a common theme with the price plummet in Meta’s share price).

Trading Meta’s Q3 results: weekly technical overview and trading strategies

The technicals aren’t looking pretty for plenty of stocks in the current climate, and Meta is a clear underperformer down roughly two-thirds since its all-time highs about a year ago compared to the Nasdaq 100 down over a third since its top late last year.

Meta’s share price is below all its main moving averages, not far off 2018 lows, somewhat walking the lower end of the band, it's RSI (Relative Strength Index) into oversold territory, a negative DMI (Directional Movement Index) on a sizable margin between the +DI to -DI (source: IG’s trading platform, weekly time frame).

That classifies it as a bear trend technical overview in the weekly time frame, stalling only in the sense of moves that have failed to reach larger weekly levels on most weeks (the daily time frame’s technical overview has been more bear average).

Keep in mind that earnings releases aren’t classified as ‘most weeks’, and in turn, technical levels usually will struggle to hold against fundamental forces.

There are also Snap and Twitter figures released prior (October 20th and 25th respectively) that depending on the results can also impact the entire social media market.

Meta weekly chart with retail sentiment

IG Client sentiment* and short interest for Meta shares

Short interest on the exchange is also a clear minority at roughly 25m shares shorted, representing only 1.13% of 2.26bn shares floated.

As for retail trader bias, it has been consecutive months of extreme buy bias, the latest reading at 97% with a tiny minority of 3% holding a sell bias. Looking at the chart above, and we can see retail sentiment (blue-dotted line as % long) consistently in extreme buy territory.

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of the week for the outer circle. Inner circle is from last Monday, October 10, 2022.