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Meta (Facebook) Stock Plunges Nearly 13%, But Bearish Options Traders Cash In

Meta Platforms (META) - ★★★★ - Ranked #8 in our Q2 2024 Large Cap Equity Rankings

Facebook parent company Meta Platforms (NASDAQ: META) saw its stock plummet nearly 13% during intraday trading on Thursday after reporting mixed first-quarter results the prior evening. While the tech giant's earnings and revenue beat Wall Street's estimates, disappointing guidance appeared to spook investors and send shares tumbling.

However, bearish options traders were able to capitalize on the sell-off. The May 17 2024 $480 put option on Meta surged as much as 200% during Thursday's session, with premiums reaching a high of $65 per contract after closing at just $20.96 on Wednesday.

For those who subscribed to our platinum research service, the outsized gains likely came as no surprise. At the start of April, we updated our 12-month price target on Meta to $480 when shares were trading over $500. At the time, with the stock up over 100% in the prior year, we warned subscribers that protective puts could be a wise options strategy given the potential for a correction.

Regarding Meta's actual earnings results, the company reported first-quarter revenue of $36.455 billion, edging out analyst estimates of $36.156 billion. Earnings per share of $4.71 also exceeded expectations of $4.33. Other key metrics were strong, with family daily active people up 7% year-over-year to 3.24 billion, ad impressions climbing 20%, and average price per ad rising 6%.

However, Meta's forward guidance appeared to sour investor sentiment. For the second quarter, the company expects revenue between $36.5 billion and $39 billion, versus estimates of $38.3 billion. It also raised its full-year expense outlook to a range of $96 billion to $99 billion, up from $94 billion to $99 billion previously. Capital expenditure projections were hiked as well, from $30 billion to $37 billion up to $35 billion to $40 billion, as Meta accelerates infrastructure investment to support its AI initiatives.

While the earnings beat failed to impress the market, bearish traders who heeded our research were able to book massive profits by purchasing protective put options ahead of the event. The outsized volatility demonstrates the continued importance of careful risk management when trading high-flying tech stocks like Meta.

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The information provided in this report is for general informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The opinions expressed in the report are our own and are subject to change without notice. We may have a position in the securities mentioned in the report, and we may buy or sell such securities without notice. Any investment decisions made based on the information in this report are solely the responsibility of the recipient. We do not accept any liability for any direct, indirect, or consequential loss arising from any use of this report or its contents.


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