Meta Platforms, Inc. (META) Shows Bullish Potential Despite Overbought Condition, 1 month ago

META Technical Analysis of Meta Platforms, Inc. (META)

Meta Platforms, Inc. (META) closed the trading session on December 22, 2023, at USD 353.39, with a slight negative change of 0.20%. The trading range for the day was USD 351.22 to USD 357.1999, indicating some volatility within a narrow range. Notably, the day's high also represents the stock's year high, signaling strong upward momentum.

The current technical indicators provide mixed signals. META's Relative Strength Index (RSI) stands at 78, which suggests the stock is currently overbought. An RSI above 70 often indicates that a stock may be in an overextended territory, which could potentially precede a pullback. However, the stock is trading well above its 50-day moving average (USD 324.73) and 200-day moving average (USD 281.96), reflecting a bullish trend over the medium and long term.

The Moving Average Convergence Divergence (MACD) is at -1.04, implying a recent bearish shift in momentum, which could signal a cooling off period following the recent highs. The Average True Range (ATR) of 2.30 also suggests moderate volatility. With a stop-loss calculated to be at USD 340.97, there is room for the stock to retreat while maintaining its current uptrend.

The current support and resistance levels are identified at USD 299.53 and USD 354.09, respectively. Given that the stock is trading just below resistance, investors will be watching to see if it can break through this level in the upcoming sessions.

Fundamental Analysis of Meta Platforms, Inc. (META)

Meta Platforms, Inc., with a market capitalization of approximately USD 908.16 billion and shares outstanding amounting to 2.57 billion, is a market heavyweight. The company has an earnings per share (EPS) of 11.47 and a price-to-earnings (PE) ratio of 30.81, which is relatively high compared to the overall market indicating investors' high expectations for future growth.

Based on the provided analyst ratings, META has predominantly "buy" signals, with 38 buys and 1 strong buy, against 10 holds and 1 sell, indicating a general consensus of bullish sentiment towards the stock amongst the surveyed analysts.

META The discounted cash flow (DCF) model suggests a valuation of META at USD 450.75, notably higher than the current trading price, implying potential for growth based on future cash flows. However, analyst target consensus suggests a mean target of USD 281.78, with a high estimate of USD 600 and a low estimate of USD 105, which injects a considerable spread and uncertainty into these projections.

Recent News and Impact

Several newsworthy events could be impacting META's stock performance. The increasing demand for Novo Nordisk's products and speculation regarding its potential future valuation exceeding that of Meta's may divert investor attention towards alternative investment opportunities in the healthcare sector.

Reductions in diversity, equity, and inclusion (DEI) programs could affect public perception of the company and subsequently investor sentiment. Meanwhile, concerns over encrypted messaging services making it difficult to monitor illegal activities such as child exploitation can have reputational risks and may prompt regulatory scrutiny. Recent fines in Italy for hosting gambling advertising compound these concerns and might contribute to negative sentiment against the stock.

Predictions for Upcoming Trading Sessions

With trading resuming on December 26, 2023, following the festive break, investor sentiment might be influenced by the broader market mood post-holiday season. Given the overbought condition indicated by the RSI, a consolidation or minor pullback could occur in the next trading day. However, the strength of the overall uptrend suggests that any retracement may be short-lived.

In the upcoming week, focus will be on whether META can surpass the resistance at USD 354.09. Should it break through this resistance with high volume, the stock could see further upside. Otherwise, some retraction towards support levels might occur.

Overall Evaluation

Considering the technical indicators, bullish momentum, and high analyst expectations, but tempering this with the current overbought condition and potential risks highlighted in recent news, the recommendation for Meta Platforms, Inc. (META) is to Hold. Investors currently holding the stock may benefit from the recent price appreciation and should be cautious about the potential for a near-term pullback due to the high RSI levels. New investors may consider waiting for a better entry point, particularly if the stock retreats to its support levels or there is a reduction in overbought conditions. Further attention should also be given to any developments relating to the news items impacting the company's public image and regulatory standing.

Check full META forecast and analysis here.