The next big event for Meta Platforms (NASDAQ:META) stock is the social media conglomerate’s upcoming earnings release. The results, along with updates to guidance, could drive a big move for shares, in either direction.
On one hand, many say that shares in the Facebook and Instagram parent could experience a “buy on the rumor, buy more on the news” type of scenario.
In other words, after trending up ahead of a strong earnings release/guidance update, these bulls believe shares will rip higher once again.
Some are calling for caution. These more bearish commentators argue high expectations are already accounted for in the stock price. Both sides make a convincing argument.
However, while some near-term traders may wonder how to make some fast profits with this widely followed FAANG component, I would instead eschew short-term thinking, and focus on the long-term.
What the Bulls and Bears are Saying Ahead of Earnings
Meta Platforms will release quarterly earnings/updates to guidance after the market close on July 26. When it comes to those arguing that shares will experience a post-earnings rip, it’s easy to see how they’ve reached that conclusion.
Ahead of the results release, analysts have upped their price targets on META stock, citing the rising chances that the company reports revenue at the top end of prior guidance, along with earnings signaling a growth resurgence/rebounding digital ad market.
Alongside this, these bullish analysts argue there could be some promising takeaways with Meta discusses with its guidance update.
For instance, further news about monetizing the company’s newly launched Reels and Thread applications, as well as its efforts in the area of generative AI.
Still, it’s not set in stone that META will experience a strong post-earnings spike in price, akin to that of some other tech stocks lately.
The aforementioned bearish commentators could prove correct, and results/guidance merely meet (or worse, fall short) of expectations. Or, Meta could beat expectations, but fail to bolt higher.
Instead of “buying more on the news,” it may just end up being your classic “buy the rumor, sell the news” situation.
The Better Approach
Put simply, swing trading in META stock before and after earnings is far from a guaranteed path to profit.
If it goes your way, you may be able to eke out some modest gains, but if doesn’t go your way, be prepared to realize some losses.
That said, don’t assume that I believe it’s best to avoid Meta Platforms ahead of earnings. Instead, as I have argued in prior coverage, META has, and continues to be, a strong long-term “buy and hold” opportunity.
Irrespective of how the stock performs in the immediate term, much points to it staying on an upward trajectory through the rest of 2023, and into 2024.
As the digital ad market slump eases, and demand normalizes, the company could continue to experience a growth resurgence.
This holds especially true, when you consider the organic growth opportunities from Reels and Thread. Meta’s use of AI to enhance ad monetization also leaves it well-positioned for further earnings growth.
Shares may zig-zag along the way, but over time earnings growth should provide a further lift for META, although this additional lift will likely arrive at a more leisurely pace, compared to the stock’s recent parabolic moves.
Don’t Rely on Earnings Alone
To the skeptics, Meta Platforms shares may seem as if they are in full-on “bubble mode,” bound to either correct, or reach a multi-year high that takes many years to re-hit/rise above.
However, if results live up to forecasts in the years ahead, I don’t see middling returns in META’s future. Per analysts, the company’s earnings per share (or EPS) will rise 40.4% this year.
In 2024, EPS could grow by nearly another 25%. Two years out, earnings growth could still be in the double-digits.
Even if the stock merely maintains its current earnings multiple (26.7 times forward earnings), such growth will probably result in more-than-satisfactory price appreciation for investors buying today.
With this, for META stock, don’t sweat the upcoming earnings report, base any decision to buy on the long-term bull case.
META stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in META. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
