Chart of the week: is there 50% upside at the fallen tech star?
6th September 2022 12:57
by John Burford from interactive investor
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Any hint of better earnings could be the spark that lights the rocket at this household name, believes analyst John Burford.
Meta is very cheap – is it a buy?
This former social media darling has certainly hit the skids this past year. In that time, the shares have lost a mammoth 60%. Last year, Facebook, now Meta Platforms (NASDAQ:META), was riding high as the company bought Instagram and WhatsApp and looked to bolster its position as the undisputed giant of the social media world.
But when positive sentiment becomes extreme, which it was, that is usually the best time to expect little further share price advances and to take at least some profits off the table.
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And today, the reverse of that set-up appears to be in play, with bullish sentiment on the floor (or is it in the basement?).
So today, with the share price languishing around the $160 region – down from the all-time high last September at $385 – can a buying programme be justified?
I believe so, and this is why:
Past performance is not a guide to future performance.
The standout takeaway pattern is the clear five-wave decline off the all-time high last September, which meets the support line on a very strong momentum divergence.
This five-wave pattern is textbook with a long and strong third wave, and the move down to the fifth wave appears complete or very nearly so.
If a rally phase can get started near term, the advance should be very powerful with my main target around the $250 region.
The downside appears very limited, but a move through the $145 print would be problematical, although the odds for a sharp snap-back if that occurs are high.
Facebook has been a terrific income generator in the past and can be again. I am quite sure the company is working on the necessary changes. Already, they are planning on introducing paid-for features on Facebook and Instagram.
Also, ad revenues have room to grow as the pressure for companies to fight looming downturns in business from the energy crisis appear.
Any hint of better earnings could be the spark that lights the Meta rocket!
John Burford is a freelance contributor and not a direct employee of interactive investor.
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