Meta’s Earnings Rebound: Strategic Dip-Buy or Prelude to Reversal?
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Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in META.
Meta's Post-Earnings Rebound: Strategic Dip-Buy or Prelude to Further Decline?
Shares of Meta Platforms, Inc. (Ticker: META) had a fallout following their last earnings report on April 24 despite exceeding expectations. But since this initial decline, shares have steadily climbed back higher. Was this a dip-buying opportunity in the big tech name, or the first leg lower in a further decline to come?
Artificial Intelligence Strides Continue
Meta is attempting to emerge as a leader in generative artificial intelligence, which is driven by content creation from computers. Essentially, it allows for the creation of creative text, images, music, or virtual worlds. As an earlier developer of the “metaverse,” one can see how Meta Platforms is positioned as a leader in this space.
The company is also making comprehensive strides in its LLaMa 3 program, which stands for Large Language Model Meta AI. It’s the driving force being the company’s entire AI program, and also has an ability to build additional AI models without risking its primary social media business.
Despite the strides in artificial intelligence, traders would be wise to keep an eye out on the next earnings report for Meta Platforms. It’s slated to be released on July 24, and even after the previous disappointing reaction, a beat on this report could be a catalyst for a rebound higher.
In such a situation, Direxion’s Daily META Bull 2X Shares (Ticker: METU), which seeks daily investment results, before fees and expenses, of 200% of the performance of common shares of Meta Platforms, Inc. (Ticker: META), could see a nice bid.
Below is a daily chart of META as of June 6, 2024.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
Could a Recession Affect Ad Spend?
Once upon a time, Meta Platforms was known as Facebook. The social media platform is still a core component of their business and generates billions of dollars in advertising revenue as it links countless businesses to consumers.
There are some mounting signs that the economy is slowing down, especially on the labor front. If unemployment rises, it could lead to less spending, which could eventually lead to a slash in advertising budgets. In time, this could affect Meta’s bottom line, and hurt the stock performance.
The next employment report is set to be released on July 5. If it starts to show a rise in unemployment, it could signal imminent weakness in Meta Platforms. Direxion’s Daily META Bear 1X Shares (Ticker: METD), which seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of common shares of Meta Platforms, Inc. (Ticker: META) may offer an opportunity to capitalize on some downside price action in such a situation.
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An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Meta Platforms, Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Meta Platforms, Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Meta Platforms, Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Meta Platforms, Inc. could affect the value of a Fund’s investments with respect to Meta Platforms, Inc. and therefore the value of the Funds.
Technology Sector Risk — The market prices of technology related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. Technology securities may be affected by intense competition, obsolescence of existing technology, general economic conditions and government regulation and may have limited product lines, markets, financial resources or personnel.
Meta Platforms, Inc. Investing Risk — Meta Platforms, Inc. is subject to a number of risks related to: its product offerings; business operations and financial results; government regulation and enforcement; the ability to collect and use consumer data; data, security and intellectual property; and the dual class structure of the company’s common stock, which limits the ability of shareholders to influence corporate matters.
Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund's investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning. Risks of the Funds include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Market Risk, Industry Concentration Risk, Cash Transaction Risk, Indirect Investment Risk, and risks specific to the technology sector and internet company industry. Additional risks include, for the Direxion Daily META Bull 2X Shares, Leverage Risk and Daily Correlation Risk, and for the Direxion Daily META Bear 1X Shares, Shorting or Inverse Risk as well as Daily Inverse Correlation Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of the Funds.