Shares of Meta Platforms (META) plummeted by nearly 15%, from $493.5 at closing time of Wall Street's regular session on Wednesday, April 24, to as low as $418.5 in after-hours trading. Current levels are nominally looking so attractive for purchasing stocks of the giant Facebook and Instagram owner, as prices are surely more reasonable for entering this market after the last three months when Meta was extremely costly for investing. Nevertheless, such a severe form of negative response to solid quarterly results of a mega cap company makes us think about the feasibility of taking extra time for probably a better, or at least a more risk-balanced decision, as even lower prices may appear in May. So, simply watching the further dynamics seems to be a rational choice in a rather mixed and complicated environment.

The problem actually was that a substantially better-than-expected EPS number of $4.71 per share, compared with $4.32 per share in analyst poll forecasts, provided a more than 9% advantage against average projections and also impressively doubled Q1 2023 EPS of $2.20. In a normal frame of market minds, this would protect the company's value from an excessively large drop, even though some softer updated guidance for the rest of the year. Another positive thing was that a much better financial return has been squeezed from growing revenue as well, but the pace of revenue rise (less than 1% vs expectations and 27% YoY) was more humble than the speed of income growth.

These achievements were driven by more daily active users than expected (amounting to 3.24 billion) and 6% YoY growth in average prices for advertisers. Yet, the crowd and most investment houses were agitated mostly by weaker points this time, pointing to the general anxiety mood related to Meta Platforms at the moment. Meta CEOs praised improving its advertisement products with AI tools like a last generation chat assistant and Llama 3, an open-source large language model that is designed as a ChatGPT competitor, while Reels (short video) formats also helped a lot in attracting customers, yet those inspiring remarks were mostly ignored by the market. At the same time, Meta was declared "guilty" enough for a tough sold-off due to the company's guidance for total revenue within the range of $36.5 billion to $39 billion for Q2 2024, meaning $37.75 billion at the midpoint to miss average analyst bets on $38.3 billion. Compared to about $36.5 billion in Q1 2024 and $32 billion in Q2 2023, Meta projections were not so sad.

Another "fault" in Meta guidance was that its full-year capital expenditures for 2024 were up from a previously estimated range of $30 billion to $37 billion, now reaching $35 billion to $40 billion. Following only $28 billion spent during a "year of efficiency", proclaimed in 2023, Meta commented it would continue to accelerate its infrastructure investments to support an "artificial intelligence roadmap". A planned increase in spending on generative artificial intelligence features, which is perceived as a boon for many other companies, is somehow interpreted in a different manner by investors for Meta, which is apparently expected to take a more economizing approach.

Meta founder Mark Zuckerberg, who backed all strict cost-cutting measures in 2023, including massive employees lay off, also said that increased investments into AI chips and big data processing are necessary for Meta to become "the leading AI company in the world". Yet, the analysts group at Goldman Sachs argued that "such a narrative results in a slight reduction in forward revenue trends'', while experts at Stifel emphasised in a client's note that the "biggest question" is whether Meta can "meaningfully monetize AI over time to justify the investment cycle".

The current intonation of many comments also shows large funds are more eager to believe in chip producers like NVidia and creators of the AI tools like Microsoft and aggregators like Google, than in financial success of pure AI users in the next year or two. The growing competition from other social networks, like Elon Musk's free speech X or China's regional communication platforms, should also be taken into account. That's probably why we are thinking of a more cautious approach to choosing particular price levels before buying Meta shares after the recent drop.