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Why Facebook Beat the Market Again Today

By Eric Volkman – Oct 29, 2021 at 4:38PM

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News of the social media giant's rebranding gets some notable "likes."

What happened

One day after formally announcing to a surprised world that it is changing its name, Facebook (META 4.10%) again saw its stock outpace the S&P 500 index. The shares closed nearly 2% higher on Friday, as several noted players in the corporate world weighed in positively about the new moniker.

So what

As every person, animal, and rock on this planet knows by now, Facebook announced Thursday it is to be called Meta, reflecting a new emphasis on the "metaverse" virtual reality (VR)-centric environment.

Although the metaverse hasn't necessarily been precisely defined, numerous investors and observers were quick to give Facebook a "like" for its largely unexpected maneuver.

Woman with headphone set seated at a chair raising hands in triumph.

Image source: Getty Images.

For example Trip Chowdhry, an analyst at Global Equities Research, said that the company's announcement was an industry-shaking moment similar to Apple's 2007 introduction of the iPhone. He believes the metaverse will see the creation of new technologies, devices, apps, and monetization opportunities. As a result he raised his price target on Facebook stock to a "street high" of $500 per share.

Another big vote of confidence was effectively granted by star investor Cathie Wood of ARK Invest. On Friday it was revealed that her company's ARK Next Generation Internet ETF had bought 86,417 Facebook shares the previous day. Wood is hugely influential among individual investors, who look to her firm's buys and sells to help gauge the viability of top-name tech stocks.  

Now what

Facebook hasn't really dived too far into the nitty-gritty of what it intends the metaverse to be (and, perhaps more importantly, how it intends to earn money from it). So while the Meta move is novel and interesting, at this point it raises more questions than answers.

Investors shouldn't make their buy, sell, or hold decisions on Facebook stock solely on this basis, then... no matter how strongly and immediately well-known people are reacting to it.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Eric Volkman owns shares of Apple and Facebook. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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