Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
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.
Shares of Meta Platforms, Inc. (Ticker: META) have probably given many traders whiplash this year. The stock tumbled from a high of nearly $540 in early July to just over $450 as month-end neared. A blowout earnings report on July 30 then saw the name gap up to over $520 on August 1 before the unwinding of the Yen carry trade (remember that drama?) sent it plunging anew. Ever since, it’s mostly been off to the races, albeit with a set-back into early August alongside weakness in the broader market.
That’s all in the past, of course. For META to continue charging higher, the company will need to deliver a solid earnings report, which is expected to be released on October 30. That catalyst will be followed in short order by the U.S. presidential election, another event that could cause heightened volatility* in the name.
Below is a daily chart of META as of September 24, 2024.
Source: StockCharts.Com, September 24, 2024.
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.
Earnings are the Main Event (For Reel)
Last quarter, META handily outperformed earnings estimates, reporting $5.17 a share* vs. consensus expectations for $4.70 (Nasdaq). For the upcoming third quarter numbers, analysts have penciled in profits of $5.15 a share (Nasdaq). At least one observer of the stock thinks the company can beat that figure. Citi analyst Ronald Josey believes META can report earnings of $5.48 a share on sales of $40.7 billion (Barrons).
His rationale? Josey points to internal Citi data showing that ad loads on Reels (those short videos you can’t stop watching) are “up 22.2% to date in the third quarter, up 70 basis points* from the previous quarter.” Josey says around 75% of advertisers on META’s platforms use Reels.
Can Zuckerberg Deliver on His Vision for Smart Glasses?
META is typically associated with Facebook and Instagram. But if Mark Zuckerberg can see into the future, we can add so-called smart glasses to that list. As The Verge notes, many artificial intelligence (AI) wearables have tried and failed to capture the public’s imagination, but the Ray-Ban Meta smart glasses could be a winner. As their reviewer succinctly put it: “At $299, they’re expensive but are affordable compared to a $3,500 Vision Pro or a $699 Humane pin. Audio quality is good. Call quality is surprisingly excellent thanks to a well-positioned mic in the nose bridge… This is a device that can easily slot into people’s lives now.”
If hype surrounding the Ray-Bans picks up, that could easily translate into a higher stock price. On the other hand, a growing sense that the product won’t move the earnings needle in the quarters to come could result in some bulls throwing in the towel.
A November to Remember? Election Risks (or Rewards Loom Large)
Traders don’t seem to be enamored with the possibility of either Donald Trump or Kamala Harris winning the White House. Trump has long complained that big tech has been biased against him, while the Biden administration has pursued serious antitrust battles against the likes of Google (Ticker: GOOGL). Truth be told, this one is up in the air. Judging by the polls and betting markets, Harris seems to be the favorite at the moment—and the fact that META and other Magnificent 7 stocks have held in there suggests traders are sanguine about her becoming president. Trump, meanwhile, is a walking wildcard, and while he may not be overly friendly with big tech, he’s also raked in lots of campaign cash from Silicon Valley.
It's probably best to think of the election as a big catalyst that will evolve—both as November 5 approaches as well as the aftermath once a winner is (hopefully) known. Long story short, traders will likely buy META if they think the next president will be hands-off toward big tech and sell the name if they perceive the next commander-in-chief is readying a crackdown.
Bull or Bear, There’s an ETF to Trade Your View
META bulls can use the Direxion Daily META Bull 2X Shares (Ticker: METU) in an attempt to magnify any gains in the stock. This leveraged ETF seeks daily investment results, before fees and expenses, of 200% of the performance of common shares of Meta Platforms, Inc.
Bears, meanwhile, can express their negative views on the name with the Direxion Daily META Bear 1X Shares (Ticker: METD). This unleveraged inverse ETF 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.
*Definitions and Index Descriptions
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.
Direxion Shares Risks – An investment in a 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.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with META and may increase the volatility of the Bull Fund.
Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with META and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to META is impacted by META’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to META at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to META increases on days when META is volatile near the close of the trading day.
Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with META and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to META is impacted by META’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to META at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to META increases on days when META is volatile near the close of the trading day.
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.
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.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily META Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund. show less
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