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Will Meta Stock Reach $400 In 2024? Can Meta Platforms Inc. Make It To $400 in 2024?

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Facebook Parent Company Meta To Report Quarterly Earnings

Drastic Volatility Prediction

In the most recent report on Meta Platforms Inc. (NASDAQ:META), the social media magnate’s stock witnessed a downgrade to a “Hold” rating. This drop came alongside a risky forecast of increased fluctuation in META stock due to escalating long-duration treasury yields.

Meta’s consistent top-line growth re-acceleration and recent margin expansion have spurred a robust recovery in free cash flow. Although META stock has showcased a vigorous upward trend, a sudden surge in treasury yields might trigger a corrective pullback in the stock despite Meta’s growing financial performance.

Viewed technically, Meta’s stock seems poised for a substantial near-to-medium-term move as the price action tightens in a triangle formation just below META’s uptrend line from its 2022 low. However, triangles can break out in either direction, so META investors need to brace for intense volatility.

Considering Meta’s robust fundamental performance and relatively rational valuation, any pullback is likely to be corrective in nature. The stock’s chart displays a triangle pattern, which can break in either direction. The price action has been getting tighter in recent weeks, with an imminent breakout or breakdown on the horizon.

If Meta manages to break back above the uptrend line and reclaim recent highs of $325, the stock could soar to all-time highs in the next 6-12 months. Conversely, a breakdown of this triangle could lead META down to the low-to-mid $200s for a gap fill. Additionally, Meta’s chart features another massive gap at ~$155, which could be the destination in the near-to-medium term if a deep recession (and advertising slump) were to materialize in 2024.

From a technical viewpoint, Meta’s risk and reward is delicately balanced at the moment, with an impending breakout or breakdown. With long-duration treasury yields surging back above pre-SVB levels [and a plethora of treasury issuance yet to come], a downward resolution seems more likely for Meta (and the tech-heavy (QQQ) ETF) in this environment.

Source: Meta Platforms Stock: Brace For Volatility (Rating Downgrade)

Following the publication of that report in mid-September, Meta stock fluctuated heavily around the $300 level [heading into Q3 earnings], experiencing peaks as high as $330 and troughs as low as $280 in October 2023. While the downturn was shallower than anticipated, the prognosis of heightened volatility for META stock proved accurate!

Then, on 25th October 2023, Meta reported Q3 earnings that surpassed expectations, with revenues amounting to $34.15B (up 23% y/y, +$0.7B higher than street estimates) and EPS rising to $4.39 (vs. est. $3.65).

Given the improved margin performance and an optimistic outlook from Meta’s leadership, the optimized margin assumption in the valuation model for META was elevated from 30% to 35%. This amendment propelled our intrinsic value estimate for Meta from $245 to $289 per share.

Despite reporting robust financial performance and a generally positive earnings call from management, Meta’s stock turned negative in the after-hours session (reversing an initial post-ER surge of +3.5%). Although the negative earnings reaction was perplexing, it was presumed that Mr. Market might be anticipating future macro weakness, so the decision was made to abstain from a purchase just above fair value.

Fortunately, Meta witnessed a further selloff [-5%] in the subsequent trading session, allowing for an opportune entry point. At my investing group, the shift from “Hold” to “Buy” occurred on 26th October, and a bullish stance on Meta has been sustained since then.

Currently, in addition to its robust fundamentals, Meta’s stock is benefiting from a steep decline in long-duration treasury yields [similar to most of the tech sector (QQQ)]. In fact, the entire post-ER rally in Meta stock (from $290 to $355) can be attributed to the movement in yields.

In today’s note, we will reassess our anticipated return for Meta in light of this significant jump in the stock. Furthermore, we will attempt to deduce a potential pathway to new all-time highs for Meta’s stock in 2024.

META’s Fair Value And Expected Return

Since we are simply aiming to gauge the impact of the surge in META’s stock price on its anticipated returns, I will not reiterate the finer details of the model in this note. However, if you’re interested, a comprehensive explanation of our valuation model for Meta is available in this report on SA.

The key update is the modification in the optimized FCF margin assumption, which has been raised from 30% to 35% [as explained in the previous section]. All of the other assumptions are straightforward, but feel free to ask any questions and/or share your thoughts in the comments section below.

Here’s our latest valuation model for Meta:

Meta Platforms: Is Meta Stock Headed Towards New Highs in 2024?

Meta’s Future Value: The Bullish Case

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