Meta Platforms stock price crosses key level: July 31st will be key

Meta Platforms (NASDAQ: META) stock price has been the second-best-performing Magnificent 7 members this year. It has jumped by 44% this year, making it the second name in the list after Nvidia. It was sitting at a record high on Friday, giving it a market cap of over $1.2 trillion. 

Meta Platforms has made a lot of progress

Meta Platforms share price has done well in the past two years, becoming one of the best-performing companies in Wall Street and making Mark Zuckerberg the fourth-richest person in the world after Elon Musk, Jeff Bezos, and Bernard Arnault. 

The company, which is the parent of Facebook, WhatsApp, Instagram, and Threads, has done well because of its position in the advertising industry. Over the years, it has overcome major challenges, including the infamous iOS upgrade, to become the second-biggest advertiser in the world.

The most recent results showed that its revenue jumped by 27% from $28.6 billion in Q1’23 to over $36 billion. Its net income soared by 117% to $12.3 billion, making it one of the most profitable companies in Wall Street.

This growth happened as the number of daily active users across all its platforms rose by 7% to 3.24 billion. Average price per ad jumped by 6% during the quarter while its cash in its balance sheet rose to $58.12 billion.

Meta Platforms has also become a leaner and more efficient company as the number of workers dropped by 10% to $69,329.

Analysts believe that the company’s growth will accelerate in the coming months. The average estimate is that its second-quarter revenue rose to over $35.4 billion, a 16.4% increase from the same period in 2023. For the year, analysts expect that its total revenue will rise to over $147 billion this year. 

The other important catalyst for the Meta stock price is that its Threads platform is doing modestly well. In a recent note, Mark Zuckerberg noted that the Twitter alternative had over 175 million monthly users and that it could soon start advertising on it.

Additionally, Meta has pivoted from its failed metaverse effort to become a leading player in the artificial intelligence (AI), which is expected to be a big industry.

Major risks remain

Meta Platforms is doing well and has already started paying dividends to shareholders. It has also maintained advertisers even as competition with TikTok rises. 

The biggest risk is that its demographics are not encouraging. Most young people don’t use Facebook and are increasingly turning away from Instagram. As WSJ noted, many people no longer share their content on Facebook and Instagram. 

While many people are not posting, there are signs that most of them check out these platforms regularly and Meta is able to monetize them. What is unclear is whether this trend will continue for long. 

The other big concern for Meta Platforms is that it has failed to monetize WhatsApp, an asset it bought for over $14 billion in 2014. Past attempts to monetize it by introducing payments solutions have not worked out well. 

Further, while paying a dividend is a good thing, it could be a sign that it is shifting from a growth company to a value one. As such, as a value stock, it should have a lower valuation metric than it does today.

Meta Platforms stock price analysis

META chart by TradingView

The daily chart shows that the META share price has done well in the past few weeks. On Friday, it crossed an important milestone as it jumped above the key resistance point at $530, its previous all-time high. Moving above that level has invalidated a double-top pattern that has been forming.

The momentum oscillator has drifted upwards and moved above 30 while the Relative Strength Index (RSI) has risen to the overbought level. Therefore, the stock will likely continue doing well in the coming weeks as traders wait for the upcoming results, which are set for July 31st.