Meta Platforms Faces Short-Term Resistance Amid Overvaluation and Regulatory Concerns

Technical Analysis

Meta Platforms, Inc. (META) closed at $703.77 on February 19, 2025, a decrease of 1.76% from its previous close, with a trading volume of 17.48 million shares, which exceeds its average volume of 13.92 million. The stock currently trades near its resistance level of $704.87, with a support level at $687. The Relative Strength Index (RSI) is at 65, indicating that the stock is on the higher end of neutral territory. The 50-day and 200-day moving averages stand at $641.65 and $554.06, respectively, highlighting a bullish trend over the medium to long term. The MACD is positive at 41.62, supporting the bullish sentiment. Given these indicators and recent challenges, the stock may face short-term resistance, suggesting limited upside momentum for the next trading day and potentially stabilizing through the upcoming week.

Fundamental Analysis

Fundamentally, Meta exhibits strong financial health with an EPS (TTM) of $23.86 and a P/E ratio of 29.5. While the company is profitable, its current market valuation surpasses its discounted cash flow (DCF) value of $569.70, indicating overvaluation. Recent strategic capex initiatives, such as increased spending on AI and networking infrastructure—highlighted by Arista Networks' growth attributed partly to Meta—underscore robust investment in its core technology offerings. However, Meta is under regulatory scrutiny, as evidenced by WhatsApp's new status under Europe's Digital Services Act, which may impose regulatory constraints and affect operating costs.

Short-Term and Long-Term Projections

For the next trading day and week, volatility might persist, influenced by strong technical indicators clashing with external regulatory pressures, suggesting potential sideways trading movements.

Intrinsic Value and Investment Potential

The intrinsic value measure, as expressed by the DCF, suggests the current stock price exceeds Meta's fundamental valuation. Nevertheless, long-term investment potential remains substantial, driven by technological advancements and diversified revenue streams. The dividend yield, based on Trailing Twelve Months (TTM), is a modest 0.28%, reflecting a reinvestment strategy aimed at growth rather than income distribution.

Overall Evaluation

Given the above analysis and broader market sentiment, Meta Platforms falls into a 'Hold' category. Current overvaluation against its intrinsic measures and prevailing regulatory headwinds necessitate cautious optimism. Consistent strategic investments in innovation position the company well for future growth, but near-term execution risks and market valuation warrant a balanced view.