Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

 

Hey Traders, 

 

Love him or hate him, Mark Zuckerberg built an incredible network that currently has 3 billion active users.

He then collects all their valuable data for use by his clients who launch online advertising campaigns targeting specific users. 

I used the advertising tools for a couple of years to help my brother attract more customers to his restaurant, and I found it to be an extremely efficient way to increase sales.

 

Now with Meta Platforms, Inc (Ticker: META) up 134% year-to-date, Zuckerberg is going after Elon Musk by offering direct competition for Twitter.

 

Today, we’ll analyze the stock at current prices and construct a low risk/high reward trade.

 

Let’s Get Ready To Rumble

 

Musk vs Zuckerberg … Twitter vs Threads

One advantage for Threads – the name alone is a knockout.

 

This may not be a fair fight. Without even trying, Threads has 30 million users. Meanwhile over the past five years, Twitter has only grown their user base by 40%. 

Zuckerberg has tied Threads to Instagram, which will efficiently transfer all contacts, followers, and information to Threads. 

Instagram grew from 370 million users to 2.3 billion in seven years – and all it takes is clicking a couple of buttons to add a Thread account.

Threads may pass Twitter’s 450 million users by the end of the year, and it could add billions in revenues as well. 

 

META Valuation

 

Valuation is the only category of concern for owning META stock right now. The graph below is Morningstar’s fair value calculation showing the stock trend with the fair value price overlay.

Notice the current price is actually $16 above fair value – and how it’s rarely ever above fair value. 

 

 

Although as we know, valuation never stops a stock from soaring ever higher. 

 

What’s the Trade?

 

META reports Q2 earnings on July 26, and it has a tendency to pull back the month after earnings. So, I ran a backtest.

If you sold a 30 delta put and bought a 10 delta put 30 days after earnings with 40 days to expiration, here are the results:

 

Average Return – 93.3%

Win Rate – 83% (10 wins/2 losses)

 

If you don’t like this one try buying a 30 delta call when the following conditions are met:

• The stock crosses the 10 day EMA
• Is above the 200-day SMA but below the 50-day SMA
• The 20-day RSI is below 70

This one had a 206% return with a 70% win rate (7 wins/3 losses).

 

With Threads, META is definitely a stock you want to play from the long side especially with these two strategies.

META is one of the best companies in America, and it’s about to get a lot better.

I bet Elon Musk can already feel Zuckerberg coming after him … 

 

What do you think about META? Leave a comment below!

 

Live and Trade With Passion My Friends,

Bill Griffo