3 reasons to buy Meta stock ahead of earnings

Key Points

• The company’s fundamentals are as good as they’ve ever been and trending in the right direction.
• Analysts are falling over themselves to increase their price targets on Meta shares.
• The stock still isn’t overbought despite all this, though, so there’s a ton of room for an upside move. 

Meta Inc NASDAQ: META reports Thursday of next week in what will be one of the more closely watched reports of the year so far. The tech giant ended 2023 on a high, and its rally has, for the most part, continued into 2024, with shares up close to 10% on where they started the year. Yesterday saw them set a fresh all-time high, topping 2021’s effort, so it’s clear expectations are high from the street for a knockout report. 

Buying into a stock ahead of a fresh earnings report can be risky business, as earnings tend to be binary and rarely neutral. They’re either considered good enough, and the stock rallies, or not good enough, and the stock falls. In other times, when a stock has rallied to the extent that Meta has, you might be inclined to think a lot of the upside is already baked into the share price, and the upcoming report would need to be red hot to justify even further gains. When expectations are so great, any slip across the range of metrics or perceived negative momentum can spell the end of a rally, so why risk it with Meta? 

Well, notwithstanding all of this, we here at MarketBeat think there are still several reasons why it is worth buying into Meta ahead of their Q4 release. Here are the top three. 

Fundamental picture 

For starters, all the key fundamental metrics have been trending in the right direction for several quarters now, and this trend shows no signs of stopping. October’s release saw them set a record high for quarterly revenue, while Meta’s earnings per share increased for the fourth straight quarter. Expenses were seen continuing to fall, which helped the company’s operating profit also hit a record with a 40% jump year on year. 

That kind of momentum doesn’t go away easily, and Meta investors have good reason to expect more of the same this time around, too. The prospect of falling rates this year, which has only increased since the last report, should also have a part to play in the company’s outlook and forward guidance, which is expected to come in well ahead of the current consensus among analysts. 

Bullish analysts

Beyond Meta’s internal momentum, the external experts are also favoring a strong report and more gains. This month alone has seen several of the Wall Street heavyweights come out bullishly on Meta’s prospects, not just in the short term but through 2024 as a whole. 

Earlier this month, the team at Mizuho said that improved monetization of Meta’s Reels and WhatsApp products should result in a positive surprise when the company reports. Analyst James Lee’s price target of $470, with its suggested upside of at least 25% from current levels, shows just how positive the surprise could be. 

In a similar vein, the team at Monness Crespi Hardt was also bullish with their comments earlier this month, noting that Meta has experienced a “stunning reversal of fortunes” that’s set to continue through 2024, with an impressive Q4 report simply the first milestone. 

Over the past week alone, we’ve seen RBC, JMP Securities, Piper Sandler, and Wells Fargo all reiterate their Buy or Outperform rating on Meta shares, with boosted price targets to boot. 

Impressive technical setup

So, with the fundamentals ticking over nicely and the analysts positioning for a strong beat, what else is there to like about the stock enough to get involved now? Well, the technical setup is particularly appealing. Meta has been setting a pattern of higher highs and higher lows for months now while not allowing its shares to get too hot at the same time. Even though the current rally is at a fresh high, with gains of more than 330%, the stock doesn’t feel or look overbought. 

Its relative strength index reading is hovering around 70, so it’s warm to the touch but in a good way. Yesterday’s pull-back from the earlier high would have done it no harm at all and, in fact, would have only strengthened the stock’s ability to tear into a new rally if the results are as hot as expected next week.