META Earnings Preview - Can Lowered Expectations Be Crushed?

Meta Platforms will announce quarterly earnings on Wednesday after the market closes.

• Meta Platforms will announce quarterly earnings today after the market closes.

• After beating EPS and revenue estimates four quarters in a row, Meta is now expected to report an EPS of $4.36 on $36.22 billion in revenue.

• In the last earnings call, Meta announced a dividend of $0.50 per share, showing its maturity as a company.

Meta Platforms (META) is off to a blistering start in 2024. After opening the year at $351.32,

META stock now sits almost 40% higher at $490. The stock reached an annual high of $531.49 earlier this month.

In the first earnings call on Feb. 1, the tech giant announced a dividend of $0.50 per share and the stock rallied almost $100 the next day. Meta has exceeded earnings-per-share (EPS) and revenue expectations in the past four quarters, and it could continue that streak after the market closes today.

Analysts expect Meta to report EPS of $4.36 on $36.22 billion in revenue—both figures are lower than the previous earnings call this year.

Some sideways motion

The large gap to the upside in the chart above signifies the previous earnings call when the company announced its dividend. The stock continued higher, but you can see there is a bit of sideways movement since then. For this earnings call, investors and traders are likely looking for more information around AI efforts, and performance plans for the rest of the year. Meta signaled that this may be the case in a statement in its last earnings release:

"This was a pivotal year for our company. We increased our operating discipline, delivered strong execution across our product priorities, and improved advertising performance for the businesses who rely on our services. We will look to build on our progress in each of those areas in 2024 while advancing our ambitious, longer-term efforts in AI and Reality Labs."

Meta will hold a conference call at 4 p.m. Central Time to offer more context around numbers presented today.

What options tell us

Looking at the implied volatility of the options market, we can see that the market places a large weight on the earnings call.

The weekly options cycle expiring this Friday boasts a +-$41.91 expected stock price move, which is almost 10% of the current stock price. This is a high-earnings-expected move, as most companies fall between the 5% to 10% range.

Looking further, we can see that the June options expiration has a +-$65.14 stock price expected move, and the Dec. 2024 options cycle has a +-$128.05. With the weekly cycle accounting for over 30% of the expected move through the rest of the year, the market is telling us that we should expect some fireworks after the market closes when the earnings figures are released.

Bullish on Meta for earnings

Meta bulls are likely looking for earnings to beat estimates on both EPS and revenue estimates, with a strong guidance through the year and a clear plan for AI advancement.

With fellow tech giant Apple (AAPL) falling from highs, all eyes are on Meta to see just how much market cap they can seize. Reduced EPS and revenue estimates may make it easier for Meta to exceed them, but the market still needs to digest information in a positive way.

Bearish on Meta for earnings

Meta bears may believe that the stock's rally so far in 2024 has exceeded expectations, and an EPS and/or revenue miss may send the stock lower.

Heightened implied volatility in the earnings cycle relative to longer-term options cycles isn't always a good sign, as implied volatility simply tells us about the level of uncertainty where the stock will end up this week. The stock is currently down on the day ahead of earnings, $20 lower than the opening print.

Tune in to Options Trading Concepts Live at 11 a.m. Central Time on Wednesday, or catch the archives, as the tastylive crew will surely be chatting about earnings options strategies ahead of the announcement after the market closes.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro. 

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.