Trading Meta (formerly Facebook) 50% Surge Amid Metaverse Focus
In early February, Meta Platforms (formerly Facebook) released a shock earnings report which sent its stock crumbling 20% in post-market trading. The stock is now down more than 50% from its record high.
While the recent stock market decline helped to accelerate Meta’s decline, it is now trading at some very interesting price levels not seen since before the pandemic.
Even more interesting is CEO Mark Zuckerberg’s shift from Meta being a social media platform to a behemoth in the metaverse. With the metaverse forecasted to bring in over $1 trillion in annual sales, it could be a huge step in the history of Meta.
Learn more about the stock further below.
|Stock:||Meta Platforms (formerly Facebook)|
|Symbol for Invest.MT5 Account:||FB|
|Date of Idea:||23 March 2022|
|Time Line:||1 - 12 months|
|Position Size for Invest.MT5 Account:||Max 5%|
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade Meta Platforms’ Share Price?
Most individuals would be quite surprised that the share price of Meta Platforms - the company which owns Facebook, Instagram, WhatsApp and Oculus – was down 50% from its record high this year.
The original sell-off in Meta’s stock price was down to an earnings report which showed a weak forecast for 2022. The sell-off was further exacerbated by a global stock market crash beginning around the same time.
However, CEO Mark Zuckerberg’s plan to focus on being a dominant player in the metaverse has intrigued analysts whose average price rating on the stock is much higher than where it is now, as discussed below.
A Potential Leader in the Metaverse & Virtual Reality Technology
In October 2021, Facebook changed its name to Meta Platforms signalling a shift in the company’s focus to the metaverse. So far, the company’s role in the metaverse is through its hardware such as the Oculus VR headset which was renamed the Meta Quest headset.
However, Zuckerberg’s plans are a lot bigger. In a recent speech during the Mobile World Congress trade show in Barcelona, he encouraged partners to work with the company to bring his vision of the metaverse to life.
Analysts Forecasts $1 Trillion in Annual Revenue from the Metaverse
Meta is considered to be a top metaverse stock which are companies that are directly or indirectly related to the metaverse. This includes stocks that provide access to the metaverse such as gaming companies, those who sell products to be used in the metaverse such as fashion and sports brands, those who provide software to create virtual 3D worlds and those who provide hardware to access the metaverse.
Both JP Morgan and Goldman Sachs forecast the metaverse to produce more than $1 trillion in annual revenue in the future. There is a reason why Meta is investing $10 billion in building its vision of the metaverse over the next five years.
Meta’s Fundamentals and Technicals Still Look Strong
Fundamentally, Meta still looks relatively strong even with a lower growth forecast for this year. The company has no debt and $40 billion in cash. Furthermore, the company’s Facebook and Instagram platforms are still favourites for advertisers helping the company to generate expected revenues of $40 billion in 2022.
Meta’s current price to earnings (P/E) ratio of 15.3 is historically low. Last year, the company’s P/E was 38. Currently, the P/E of the S&P 500 is 25 – suggesting there is a lot of unrealised value in Meta’s share price. The price to earnings ratio measures a company’s current share price relative to its earnings per share.
Source: Admirals MetaTrader 5, FB, Monthly - Data range: from 1 May 2012 to 23 Mar 2022, performed on 23 Mar 2022 at 7:00 am GMT. Please note: Past performance is not a reliable indicator of future results.
In the monthly chart of Meta’s share price shown above, the current price is trading around key levels of historical support. This includes an ascending trend line (the black line), where buyers have historically turned up before in 2013, 2018 and 2020.
Analyst Forecasts for Meta Platforms Share Price
According to 46 analysts polled by TipRanks, there are now more ‘buy’ ratings on the stock than ‘hold’ or ‘sell.’ Of the analysts polled providing a 12-month forecast, the highest price target is $446.00, the lowest price target is $220.00 and the average price target is $325.45.
Source: TipRanks, 23 March 2022
An Example Trading Idea for the Meta Platforms Share Price
An example trading idea for the Meta Platforms share price could be as follows:
- Buy the stock on a break above $220.00.
- Target the median analyst price target of $325.00.
- Keep your risk small at a maximum of 5% of your total account.
- Time Line = 1 – 12 months
- A move to the median price target level would result in a more than 50% potential gain.
- Some investors may choose to target the highest analyst price target level of $446.00 which would result in a more than 100% potential gain over a much longer period of time.
It’s wise to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises. Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.
Another factor to consider is the commission as these can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in Meta Platforms stock would result in a commission of $0.20 ($0.02 * 10 shares).
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall!
How to Buy Meta Platforms Shares in 4 Steps
With Admirals, you can buy shares in US companies like Meta Platforms with a competitive commission of just 0.02 USD per share with a low minimum commission of just $1.0.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for the Meta Platforms stock ticker ‘FB’ at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance.
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Do You See the Meta Platforms Share Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance that Meta Platforms' share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account.
This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article.
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