Shares of Meta Platforms, previously known as Facebook, are down 38.28% year to date, with the stock price hitting US$207.60($280.82) as at Feb 24. The stock saw a sharp decline of 26.4% on Feb 3 when it released its quarterly earnings, marking the biggest single-day US stock plunge and wiping out US$230 billion in market value.
Should investors be worried?
Despite y-o-y revenue and net income increasing 37% and 35% respectively, the attention of investors was mainly focused on the current 1QFY2022 earnings guidance. In the earnings release, Meta CFO published an outlook for FY2022 growth to be between 3% and 11%, which is lower than what analysts expected. In the report, Meta’s CFO mentioned increased competition, Apple’s IOS change and inflationary cost for advertisers as negative factors. The company’s monthly active users have also seemed to hit a plateau at about 2.9 billion users.
Some investors have attributed the decline of Meta to the new function known as App Tracking Transparency (ATT) launch in Apple’s latest iOS 14.5 release. The new ATT function gives consumers the ability to deny applications from collecting data on their daily activities. What this means is that applications such as Meta’s Facebook would no longer be able to track consumer’s activities and therefore will not be able to provide targeted marketing for advertisers.
A report published by Counterpoint Research indicated that in 4Q2021, Apple occupied 22% of the global smartphone market share followed by Samsung with 18% and Xiaomi with 12%.
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Apple’s 22% market share of global smartphone is sizable and the impact of its ATT would be a great deal on applications which rely on advertising for revenue. As such, Meta’s Facebook would continue to face considerable headwind from new functions like these which could be why they are focusing more now on Web3.0 and the metaverse.
Technical outlook
Macroeconomic events from rising inflation to hawkish US Fed’s continue to pull down technological stocks like Meta. On the technical front, investors can look out for a key support level at US$223. A strong break below could see Meta trade within the range of between US$126 and US$223. Those were levels last traded from 2018 to 2019. Investors can also pay more attention to the 20EMA crossing of 50EMA on the weekly chart which could potentially mark as a death cross.
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As the RSI 14 looks oversold, we could potentially see the stock trade higher towards its resistance around the US$246 level before coming back lower.
Derek Wee is a strategist at Phillip Nova.
Header Photo: Reuters
