Meta Platforms (META) could see its 2023 rally at risk if ad revenue disappoints.
META – Weekly Chart
META stock bottomed in late-2022 and mounted an impressive rally from around $100 to $220. That could be a lofty valuation if the current earnings season disappoints.
The price of Meta has resistance at $220 and initial support at the $180 level.
“Tech stocks have become the new safety trade with Big Tech names a major beneficiary of this dynamic,” Wedbush analyst Dan Ives said.
“The combo of massive cash balances and free-cash-flow potential, significant cost-cutting underway in the Valley led by Meta, Microsoft, Amazon, Google, and others, conservative guidance already given in the January earnings season ‘rip the Band-Aid off moment,’ and tech fundamentals that are holding up in a shaky macro are setting up for a green light for tech stocks in our opinion,” he added.
Meta has been part of that cost-cutting with a plan to eliminate more than 10,000 jobs. An internal memo seen by Bloomberg said that staff had been braced for more cuts on Wednesday in the company’s “year of efficiency”.
Digital Ad Revenue Continues to Haunt Big Tech Companies
The Wall Street Journal reported that digital ad revenue grew again in 2022, but more slowly than in previous years. Last year’s return of around 12% was sharply lower than 2021’s 35% growth. However, that figure exceeded the expected 15-20% growth rates.
Marketers have been cutting spending in recent months as the potential for a recession in the US hits profits and advertising spending. Social media has also been affected worst, with ad revenue up only 3.6% in 2022, a sharp drop from 39.3% in the previous year. Bytedance’s TikTok app has involved big tech companies with 150 million monthly users.
The price of Meta could pull back to its $180 support if sales are negative on Wednesday.
