META stock price extended losses on Friday, declining by 1.5 per cent to trade at $434.06 at the time of writing. The tech giant’s woes started on Thursday when CEO Mark Zuckerberg announced that more expenditure will go toward AI R&D, signaling a possibility of lower growth headroom in the medium term.
The announcement was made during the announcement of Q1 2024 earnings, which showed that META actually performed beyond expectations. The company earned $36.46 billion in revenue against a projection of of $36.16 billion. Furthermore, the earnings per share stood at $4.71, beating the forecast $4.32. However, it did not sit well with most investors, as the company announced that it expects to earn $36.5-$39 billion, translating to a midpoint of $37.75 billion. However, that figure falls short of consensus estimate of $38.3. billion.
One of the greatest concerns among investors is that there is no surety that the AI (ad)venture will pay off and when, if at all, it will do so. META’s much-hyped metaverse investment saw the company hemorrhage money two years ago, and lessons from that experience have brought an element of doubt around the AI project.
While many investors agree that AI looks more promising than metaverse-focused technologies, Meta has not proven its acumen on this front, with Zuckerberg stating that the payoff from AI could be “years away”. Many investors are understandably not prepared to put their money in “experimental” long-term ventures. That said, META has also proven severally its ability to innovate, and therein lies its strength amidst the current market slump.
Technical analysis
META stock price faces downward pressure, as indicated by the RSI, which shows that the sellers have the upper hand. The pivot is at 431.08, and the downside will prevail if resistance remains at this point. That could build the momentum to break below 421.02 and potentially test 410.53. On the other hand, the buyers will be in control if the price moves above 431.08, and the resulting momentum could propel movement to the 447.26 resistance. Furthermore, a continuation of bullish control at that mark will likely break the resistance and potentially test 460.38.
