Shares of Meta Platforms (META -0.28%) have been among the big winners over the last year and a half, but the social media stock's rally hit a wall in April after it fell on its first-quarter earnings report.
According to data from S&P Global Market Intelligence, Meta stock lost 12% in April. As you can see from the chart below, the stock was actually in positive territory for most of the month before falling sharply at the end of April after its earnings report came out.
Meta spooks investors
Shares of Meta actually bucked the broader trend in the stock market in the first half of the month as investors seemed to fear that tech stocks had become overvalued amid signs that the Fed might delay interest rate cuts.
However, that optimism went by the wayside after the company reported first-quarter earnings on April 24. The stock fell 10.5% the following day, though it had traded down as much as 16%.
Meta actually topped estimates on a strong quarter, reporting revenue growth of 27% to $36.5 billion, which was ahead of the analyst consensus at $36.2 billion.
The company experienced a 20% increase in ad impressions across its family of apps and the average price per ad rose 6%, a sign of increasing demand among advertisers and a strengthening ad market.
On the bottom line, Meta's results also impressed as the margins expanded after it reduced headcount last year with several rounds of layoffs. Earnings per share jumped 114% to $4.71, which was ahead of estimates at $4.32.
While investors were pleased with that performance, comments about the rest of the year prompted the sell-off.
The company said it would increase its capital expenditures for the year from $30 billion-$37 billion to $35 billion-$40 billion to support its artificial intelligence (AI) investments, and it raised its expense forecast for the year from $94 billion-$99 billion to $96 billion-$99 billion.
Finally, its second-quarter revenue guide was $36.5 billion-$39 billion, which translated to 24% growth, but the midpoint was below the consensus at $38.29 billion.
Image source: Getty Images.
What's next for Meta
The sell-off in the stock in response to the increased spend on investments seems like a mistake, but the company's growth rate could slow as the benefit of its job cuts starts to roll off.
However, with the reset in the stock price, the valuation still seems appealing. The social media stock still looks like a good candidate for long-term outperformance.
