Meta Slipped Back Below $600 Before Wednesday's Report. It Now Trades at About 22 Times Earnings. Here's What Investors Should Know.
Meta Platforms closed Friday at $595.19, back under $600 and about 25% below its 52-week high of $796.25. The company reports second-quarter results after the close on Wednesday, July 29.
Intelligence analysis by Llama
Meta's stock has recovered from a 20% drawdown to within 5% of flat for the year. The company's advertising business is still taking share of a growing market, but its capital spending range has raised concerns about the payback period.
Imagine you have a lemonade stand, and you're making more and more lemonade every day. But, you're also spending a lot of money on new equipment and ingredients. If you're making more lemonade, but spending more money, you might not be making as much profit as you thought. That's kind of what's happening with Meta's stock. They're making more money from their advertising business, but they're also spending a lot of money on new technology and infrastructure. This is making investors a little nervous.
Analysis
A $60B Vote of Confidence
Meta's advertising business is still taking share of a growing market, with first-quarter revenue rising 33% year over year to $56.31 billion. Ad impressions across its apps climbed 19%, average price per ad rose 12%, and family daily active people averaged 3.56 billion, up 4%. This is not a business losing ground.
Why Cursor?
The markdown is about the spending. Meta raised its 2026 capital expenditure range to $125 billion to $145 billion in April, and it spent $19.84 billion in the first quarter alone, up from an initial range of $115 billion to $135 billion. Investors have watched that range move up once already, and they appear to be pricing in the chance of it moving again.
The Road Ahead
Wednesday's earnings report will settle two things. First, Meta's revenue guidance for the second quarter, which is expected to be between $58 billion and $61 billion, will provide insight into the company's advertising business. Second, the report will give investors a better understanding of Meta's capital spending plans, which are key factors in determining the stock's value. If the company's revenue growth slows down, it could be a sign that the advertising market is becoming more competitive. On the other hand, if Meta's revenue growth continues to be strong, it could be a sign that the company's advertising business is still taking share of a growing market.
Key points
- Meta's advertising business is still taking share of a growing market.
- The company's capital spending range has raised concerns about the payback period.
- Wednesday's earnings report will provide insight into Meta's advertising business and its capital spending plans.
- Strong revenue growth and a solid advertising business could lead to a recovery in the stock's price.
- Slowing revenue growth and a decrease in advertising business could lead to a decline in the stock's price.
If Meta's second-quarter earnings report shows strong revenue growth and a solid advertising business, the stock could recover from its current 20% drawdown and potentially reach new highs. This would be a positive sign for investors, indicating that the company's advertising business is still taking share of a growing market.
If Meta's second-quarter earnings report shows slowing revenue growth and a decrease in advertising business, the stock could continue to decline, potentially reaching new lows. This would be a negative sign for investors, indicating that the company's advertising business is becoming less competitive.
