Meta Platforms: Withstanding The Tariff Turbulence
Meta Platforms, the company that operates Facebook and Instagram, may be sitting in an enviable position. The Trump trade war has impacted a lot of global companies and those that rely heavily on imported goods. Meta, however, is largely a digital company and has been able to sidestep a lot of those geopolitical pressures.
Plus, now that tech stocks are leading the market again, Meta may be getting both sentimental and fundamental boosts. This company has one of the more durable moats at the moment and its revenue generation capabilities have been impressive, even through some pretty challenging environments.
After correcting during the March/April timeframe, Meta has since been rebounding higher again.
source: StockCharts
Meta was pulled lower earlier this year after market sentiment turned sharply south. It has subsequently been able to ride a wave of returning positive sentiment after the tariff rhetoric has moderated, if not quite cooled, and the U.S. economy has remained resilient.
The MACD indicator1 has reflected the stock’s sharp reversal. After momentum sank to multi-year lows around Liberation Day, it has reversed and mostly been improving ever since. The sharpest gains in momentum happened during the mid-April to mid-May cycle, but there’s even been another small boost over the past couple weeks to keep the strength intact.
The Chande Trend Meter2 isn’t quite back to its highest levels of the past few years, but it’s close. The positive readings here probably suggest that there’s an overbought element at current prices, but the uptick in technical strength has been quite durable to this point.
The RSI3 is also signaling potentially overbought conditions. It crossed above the key 70 level, which according to technicians generally signals that a stock is overbought, in early June, but has stayed in that area ever since. Overbought conditions don’t necessarily mean that a reversal is imminent and Meta has been an example of that so far.
Overall, we feel that Meta Platforms has enjoyed a positive story recently. Its relative insulation from the trade war provides some sense of confidence that it may be able to avoid some level of geopolitical risk. Shareholders have been rewarded recently, but the overhang of economic risks globally continue to present some challenges.
1According to Investopedia, the MACD (or moving average convergence/divergence) indicator is “a technical indicator to help investors identify price trends, measure trend momentum, and identify entry points for buying or selling.”
2According to ChartSchool, the Chande Trend Meter “assigns a numerical score to a stock or other security, based on several different technical indicators covering six different timeframes. Distilling all this technical information down into a single number provides an easy way to identify the strength of the trend for a given security.”
3According to Investopedia, the relative strength index (or RSI) “measures the speed and magnitude of a security's recent price changes to detect overbought or oversold conditions in the price of that security.”
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