Meta Platforms stock continues its earnings sell-off on Friday
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UPGRADE- META lost further ground on Friday after Thursday's 11% sell-off.
- The market was surprised by the $16 billion tax charge in Q3 earnings.
- Overall, Q3 earnings showed continued gains in the advertising business.
- Traders will expect META stock to close two lower gaps from May of this year.
Don't click that "buy" button just yet! Meta Platforms (META) might look appetizing to some dip buyers after Wednesday's earnings massacre, but even a quick glance at the daily chart tells us that the downside for META from here offers more possibilities.
Mark Zuckerberg's company, which owns Facebook, Instagram and WhatsApp, missed extravagantly on GAAP earnings per share (EPS) for the third quarter of 2025 on Wednesday. Meta posted GAAP EPS of $1.05, an incredible 84% lower than Wall Street's $6.71 consensus. The shortfall is owed nearly exclusively to an almost $16 billion one-time tax charge caused by the Trump administration's One Big Beautiful Bill Act that was passed earlier this year.
That allowed META stock to slide more than 11% on Thursday, and Friday has seen new lows.
Meta Platforms stock news
Many retail investors know that buying Mag 7 stocks following large downward swings always seems to work out in the end. And in that sense, we agree. There are a number of reasons to believe strongly in Meta's return to new highs.
First, while causing an unexpected pullback in Meta's share price, the government tax bill will reduce taxes substantially over the long run. In fact, Meta's top brass think the lower tax rates will boost earnings as soon as Q4.
Then there's the adjusted earnings. If we discard the one-time tax charge, adjusted EPS arrived at $7.25, a full $0.58 ahead of the analyst consensus. This means that adjusted earnings, the figure that most investors focus on over the long term, rose 20% from a year earlier.
Ad impressions delivered across the Family of Apps segment increased by 14% on an annual basis in Q3, while average price per ad increased by 10% YoY. This tells us that pricing power and demand remain robust, while Zuckerberg said that Facebook Reels has reached a $50 billion per annum run rate. The company's prized possession doesn't appear to be slowing down.
If anything is bothering the market, it's likely the intense level of capex going into Meta's AI investments. The already heady $69 billion mid-level estimate for 2025 was pushed up during the earnings call by an extra $2 billion. Like the company's Reality Labs side hustle, which lost another $4 billion during Q3 as it had for the five previous quarters, the AI investments are likely years away from turning a profit if at all.
With the metaverse investments losing $73 billion cumulatively to date, investors can be forgiven for thinking the heavy investment in AI data centers is just another boondoggle requiring an eventual write-down. News spread on Friday that Meta is looking to raise $30 billion in a bond sale to sustain the AI buildout, a sign that the price tag of this venture is steep.
Meta Platforms stock forecast
The daily chart is fairly self-explanatory. While nubile traders might be enticed by the prospect of a quick return to the $700s, a more seasoned professional sees two notable gaps that need to be filled.
First comes the May 12 gap up that leaves a gap between $611 and $619. Markets love to close gaps, and to do so, META needs to trade about 6% lower to reach $611.
The second gap also hails from May, the first day of the month to be exact. That gap from $558.50 to $570.50 would require META to tag the lower figure by shedding another 14% from Friday's closing price of $649.50.
META daily stock chart
But not to be left out, bulls then have the higher gap to close as well. The gap created by Wednesday's earnings crash requires META to trade candle by candle from $680 to $742.50, which could take some time. It would be fun if META could close the two lower gaps before closing the upper gap. That would be a wild ride for sure.
- META lost further ground on Friday after Thursday's 11% sell-off.
- The market was surprised by the $16 billion tax charge in Q3 earnings.
- Overall, Q3 earnings showed continued gains in the advertising business.
- Traders will expect META stock to close two lower gaps from May of this year.
Don't click that "buy" button just yet! Meta Platforms (META) might look appetizing to some dip buyers after Wednesday's earnings massacre, but even a quick glance at the daily chart tells us that the downside for META from here offers more possibilities.
Mark Zuckerberg's company, which owns Facebook, Instagram and WhatsApp, missed extravagantly on GAAP earnings per share (EPS) for the third quarter of 2025 on Wednesday. Meta posted GAAP EPS of $1.05, an incredible 84% lower than Wall Street's $6.71 consensus. The shortfall is owed nearly exclusively to an almost $16 billion one-time tax charge caused by the Trump administration's One Big Beautiful Bill Act that was passed earlier this year.
That allowed META stock to slide more than 11% on Thursday, and Friday has seen new lows.
Meta Platforms stock news
Many retail investors know that buying Mag 7 stocks following large downward swings always seems to work out in the end. And in that sense, we agree. There are a number of reasons to believe strongly in Meta's return to new highs.
First, while causing an unexpected pullback in Meta's share price, the government tax bill will reduce taxes substantially over the long run. In fact, Meta's top brass think the lower tax rates will boost earnings as soon as Q4.
Then there's the adjusted earnings. If we discard the one-time tax charge, adjusted EPS arrived at $7.25, a full $0.58 ahead of the analyst consensus. This means that adjusted earnings, the figure that most investors focus on over the long term, rose 20% from a year earlier.
Ad impressions delivered across the Family of Apps segment increased by 14% on an annual basis in Q3, while average price per ad increased by 10% YoY. This tells us that pricing power and demand remain robust, while Zuckerberg said that Facebook Reels has reached a $50 billion per annum run rate. The company's prized possession doesn't appear to be slowing down.
If anything is bothering the market, it's likely the intense level of capex going into Meta's AI investments. The already heady $69 billion mid-level estimate for 2025 was pushed up during the earnings call by an extra $2 billion. Like the company's Reality Labs side hustle, which lost another $4 billion during Q3 as it had for the five previous quarters, the AI investments are likely years away from turning a profit if at all.
With the metaverse investments losing $73 billion cumulatively to date, investors can be forgiven for thinking the heavy investment in AI data centers is just another boondoggle requiring an eventual write-down. News spread on Friday that Meta is looking to raise $30 billion in a bond sale to sustain the AI buildout, a sign that the price tag of this venture is steep.
Meta Platforms stock forecast
The daily chart is fairly self-explanatory. While nubile traders might be enticed by the prospect of a quick return to the $700s, a more seasoned professional sees two notable gaps that need to be filled.
First comes the May 12 gap up that leaves a gap between $611 and $619. Markets love to close gaps, and to do so, META needs to trade about 6% lower to reach $611.
The second gap also hails from May, the first day of the month to be exact. That gap from $558.50 to $570.50 would require META to tag the lower figure by shedding another 14% from Friday's closing price of $649.50.
META daily stock chart
But not to be left out, bulls then have the higher gap to close as well. The gap created by Wednesday's earnings crash requires META to trade candle by candle from $680 to $742.50, which could take some time. It would be fun if META could close the two lower gaps before closing the upper gap. That would be a wild ride for sure.
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