Why Meta Platforms Stock Jumped 18% in May

Globe and Mail

4 days ago

Shares of Meta Platforms (NASDAQ: META) were moving higher last month after the social media giant jumped on a better-than-expected earnings report, and the stock gained again in the second week of May on news of a detente in the trade war between the U.S. and China.
According to data from S&P Global Market Intelligence, the stock finished the month up 18%. As you can see from the chart below, the stock jumped early in the month following its earnings report and tacked on gains from there.
META data by YCharts.
Meta is back on the move
After sliding in April on concerns around the trade war, Meta delivered a solid rebound thanks to impressive first-quarter results and hopes that the impact of the trade war would be more modest than previously expected.
Meta stock gained 4.2% on May 1 and 4.4% the following day after its Q1 earnings report came in above expectations. Revenue in Q1 rose 16% to $42.3 billion, ahead of estimates at $41.4 billion. The company reported growth in users, ad impressions, and average price per ad, driving the strong growth in revenue, and its margins continued to improve, lifting its earnings per share (EPS) up 37% to $6.43, which easily beat the consensus at $5.22.
Meta's guidance was also promising as the company forecast revenue of $42.5 billion to $45.5 billion in Q2 and lowered its full-year expense guidance by $1 billion.
The other significant event lifting the stock was the broader surge in the market on May 12 after the U.S. and China agreed to temporarily lower tariff rates. Meta, which is seen as a macroeconomically sensitive stock due to its dependence on digital advertising, gained 8% on May 12 on that news, and it closed out the month 1% higher as it traded mostly sideways over the remainder of May.
What's next for Meta
Another issue that may have impacted the stock last month is pressure on rival Alphabet, which has been accused of operating a monopoly in two different businesses. Last month, the stock fell on news that Apple was considering offering AI search engines like Perplexity on its devices as an alternative to Google.
Meta should benefit from any weakness at Alphabet as the two compete for digital advertising spending and in AI.
While a weakening economy would present a challenge to the company, based on its Q2 guidance and the strength of Meta AI, the stock looks well positioned to keep gaining.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, and Meta Platforms. The Motley Fool has a disclosure policy.