Facebook Shares For Sale Nasdaq
Matthew Pendergrass
Last year was a comeback year for Meta Platforms (META), after a disastrous 2022 for the Facebook parent company. This year, Meta stock got off to a strong start before a sharp pullback following its first quarter earnings report.
"The biggest surprise in the quarter was not the lower-than-expected revenue guidance or elevated capex; rather, it was that Meta will be in an investment cycle in the foreseeable future," Mizuho analyst James Lee wrote to clients following the report.
Following the earnings letdown, Meta stock has slowly been working its way back up. Meta stock retook its 21-day moving average on May 9, according to MarketSurge charts. But shares closed on Thursday still below below Meta's 50-day moving average.
Meta stock also holds a IBD Composite Rating of 95 from a best-possible 99. The score means Meta stock currently tops nearly all other stocks in terms of key performance metrics and technical strength.
But Meta stock holds a lowest-possible Accumulation/Distribution Rating of E. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates heavy selling by institutions over that period.
Another factor to watch for Meta is regulation. Meta shares fell in trading on May 16 after European Union regulators said the were probing Facebook and Instagram for potential breaches of online content rules for children. The regulators said they were concerned that algorithmic content feeds could "stimulate behavioral addictions in children."
The EU's concerns are similar to those voiced in a lawsuit filed by leaders from 42 U.S. states in October. That lawsuit alleged Facebook and Instagram harnessed "technologies to entice, engage, and ultimately ensnare youth and teens."
Meta is also facing an antitrust challenge from the Federal Trade Commission. The FTC sued back in December 2020, alleging Facebook had abused monopoly power in acquiring competitors Instagram and WhatsApp. The original lawsuit was dismissed in 2021, but the FTC filed an amended lawsuit later that same year.
In April, Meta filed to have the lawsuit dismissed ahead of a potential trial. "The FTC has failed to state a plausible claim, and the agency has done nothing to build its case through the discovery process to prove otherwise," the company said.
Meanwhile, Meta is pushing to become an AI leader. The company took a big step on April 18, when Zuckerberg announced a series of new updates for the company's Meta.ai chatbot. The chatbot is powered by Meta's Llama large language model, which also got a big update with the release.
The trillion-dollar tech giant is featuring the chatbot more prominently across Facebook, Instagram, Messenger, WhatsApp and Threads. The company also launched a stand-alone website for the bot at Meta.ai. The launch marks Meta's clearest challenge yet to ChatGPT, the AI chatbot from OpenAI that started the generative AI craze in November 2022. Zuckerberg said on Threads that he views Meta.ai as the "most intelligent AI assistant that you can freely use."
That's despite Zuckerberg renaming the company nearly three years ago from Facebook to Meta. The move signaled the company's plan to embrace an augmented-reality metaverse. But investors and the tech world at large these days are far more anxious to hear about generative AI.
Last year, Meta launched the fist version of Llama, which powers generative AI applications. In the fall, the company rolled out a series of consumer-focused chatbots, each designed to have a distinct personality.
Zuckerberg describes Llama as an open-source approach to AI. He's focused on attracting software developers to create tools using Llama. As for revenue from those efforts, Zuckerberg said the company expects its chatbots and other AI tools to drive more engagement with its products.
AI is also powering what the company has described as a new recommendation engine for videos on Facebook and eventually across Meta's apps, Facebook leader Tom Alison said at a recent Morgan Stanley investor conference.
On May 22, Bloomberg reported that Meta is creating an advisory group for its AI efforts. The council includes Shopify founder and Chief Executive Tobias Lutke, as well as Patrick Collison, co-founder of payments startup Stripe.
The big spending disclosed in Meta's first quarter report likely brought up memories of Meta's rough 2022, when shares tanked as revenue slowed and the company ramped up investments on its metaverse vision. But analysts have described this current round of spending as different, particularly because Meta's core advertising is still growing quickly.
Despite its push into AI and the metaverse, social media advertising remains the heart of Meta's business. About 98% of its revenue is from advertising on its "Family of Apps." The category includes Facebook, Instagram, Messenger, Reels, WhatsApp and Threads.
The huge user bases for Facebook and Instagram, paired with an AI-powered advertising sales platform, help Meta dominate social media advertising. Research firm eMarketer estimates Meta will capture 21.9% of all U.S. digital advertising sales in 2024. Only Google has a bigger projected share, with 27.4%. Amazon is third, with 8.5% of the market.
Something else to watch for Meta stock: One of its biggest competitors could be banned from the U.S. On April 24, President Joe Biden signed into law a bill that requires TikTok's Beijing-based owner ByteDance to sell the app or it will be banned.
Lawmakers and others in favor of a TikTok ban view the short-video app as a potential security threat and fear user data could be shared with the Chinese government. There are also concerns that TikTok's algorithmic content recommendations could be used to shape public opinion among U.S. users. Meanwhile, those against the potential ban, or forced sale, say the idea violates free speech rights. Further, TikTok's ownership denies that it is controlled by the Chinese government.
Zuckerberg has previously acknowledged TikTok as a "very effective competitor." Instagram and Facebook compete against TikTok for user attention, plus advertiser dollars. Meta launched its own short-video product, Reels, late in 2021 in response to TikTok's rapid rise in the U.S.
But the company did see some progress in its efforts. Sales for Reality Labs surpassed $1 billion in the fourth quarter of 2023 for the first time. The category was helped by the launch of Meta's latest VR headset, the Quest 3. Revenue for Q1 was $440 million, up 30% from a year earlier.
Meanwhile, research firm IDC estimates that Meta powered more than 60% of all global augmented- and virtual-reality headset shipments in the final three months of 2023. The Quest 3 powered a big step up for Meta compared to the 35% market share IDC estimated for the company in the fourth quarter of 2022.
But Zuckerberg says he is unimpressed. In an unusual move, he posted a video on Instagram of himself in February reviewing the rival product. "After using (the Vision Pro), I don't just think Quest is the better value," Zuckerberg said. "I think that Quest is the better product, period."
Meta Platforms, Inc., formerly known as Facebook, Inc., is an American international technology corporation based in Menlo Park, California, that trades as Meta. Facebook, Instagram, and WhatsApp, among other subsidiaries, are all owned by the firm. Meta, along with Amazon, Google (Alphabet Inc), Apple, and Microsoft, is one of the world's most valuable corporations and is regarded as one of the Big Tech companies in US information technology. The sale of advertisement spaces to marketers accounts for a significant portion of the company's revenue.
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