Has Meta just saved the market? FB stock surges 20% on earnings with AAPL and AMZN to come

• Meta (FB) stock rallies over 15% after hours on earnings release.
• Facebook parent company may now have helped the S&P 500 to bottom out at key support.
• AAPL and AMZN release earnings after the close on Thursday.

Facebook parent company Meta (FB) stock surged ahead after the close on Thursday as the company unveiled mediocre earnings. Nothing too dramatic but we had pointed out beforehand how the risk-reward was skewed to the upside. Many traders and investors were fearing the worst and another repeat of Meta's earnings last time out.

The market was probably too short or underweight FB stock whichever way you want to look at it. Because the reaction certainly told us that. The earnings were average, nothing more than that but Facebook Meta stock still rallied nearly 20% straight off the release. That tells of a positioning imbalance rather than an earnings beat.

Facebook Meta (FB) stock news: Earnings relief rally

Meta (FB) earnings per share (EPS) came in at $2.72 versus $2.55 estimate. Revenue came in at $27.91 billion versus $28.21 billion estimate. So a beat on EPS but a miss on revenue. Mixed results. Facebook daily active users (DAU) were slightly better than what analysts had been expecting with DAU's hitting 1.96 billion. Facebook guided Q2 revenue of $29 billion at the midpoint while analysts had estimated Q2 revenue at $30.69 billion.

Bloomberg made a bit of a mess of things just before the earnings release as it ran a headline posting that Q2 revenue guidance was $27-29 billion, that was actually old guidance for Q1. The stock slumped before quickly correcting as Bloomberg moved to retract the story and issue a correction. Even the best make mistakes! 

So anyway a slight divergence there but these are not exactly great numbers as already mentioned. Wall Street had seriously moved down revenue estimates for Q1 after the last earnings debacle. But Facebook (FB) did not even match that low bar. This was just a relief rally pure and simple. Q2 guidance also disappointed and missed estimates. 

Meta CEO Mark Zuckerberg, aka "The Zuck" said: 

"Last year, we began looking at our business as two segments, Family of Apps and Reality Labs. On the Family of Apps side, I am confident that we can return to better revenue growth rates over time and sustain high operating margins. In Reality Labs, we're making large investments to deliver the next platform that I believe will be incredibly important both for our mission and business are comparable in value to the leading mobile platforms today.

I recognize that it's expensive to build this , it's something that's never been built before and it's a new paradigm for computing and social connection. So over the next several years our goal from a financial perspective is to generate sufficient operating income growth from Family of Apps to fund the growth of investment in Reality Labs while still growing our overall profitability. Unfortunately, that's not going to happen in 2022 given the revenue headwinds, but longer term that is our goal and our expectation".

So still banking the house on the Metaverse then!

Facebook (FB) stock forecast: Bear-market rally coming?

Before the release, we said the risk-reward was skewed to the upside. Luckily your author eventually took his own advice and bought some cheapies just before the close. I quickly sold 80% of the position so I have a free shot on the last few. I am not super confident, to be honest, but my view on the overall market is turning more bullish.

If we can get through Apple (AAPL) and Amazon (AMZN) earnings tonight unscathed then I think the rally could be back on, a bear market rally but a rally nonetheless. So back to Facebook. The recovery after hours took FB back to the 21-day moving average. Before earnings we also had buy signals from the RSI and MFI, so really the risk-reward was flashing buy-buy. 

FB stock chart, 20 hour bars

If FB really is bullish (I doubt it) then it needs to take out $236.74 the last significant high. Otherwise, the weekly chart below shows us where FB is headed, $137.

FB stock chart, weekly

Now onto the impending rally in the S&P 500 I talked about. Take a look for yourselves. If the S&P 500 (SPY) holds this $410 to $415 support sone then a rally up to $440 should be the most likely outcome.

SPY chart daily

*The author is long FB stock