It’s easy for the casual investor to get caught up in what’s trending on mainstream media.
In most cases, my advice is to steer clear.
Just because a stock makes a headline, doesn’t mean it’s worth buying.
And even if you know 50 people who have invested in the same stock, it doesn’t mean you should clear out your savings and do the exact same thing.
Adam O’Dell and I would rather look for profit where no one else is. That’s when you find the stocks waiting to take off.
But I’m going to follow the crowd today.
That’s because I want to use Adam’s Green Zone Power Ratings system and show you a company that’s popular (sometimes for the wrong reasons) … has made headlines … and is worth keeping an eye on for the future.
Social Media Giants Dominate Recent Headlines
Last week, Elon Musk hit the top of the fold when he arbitrarily rebranded Twitter to “X.”
Not sure anyone really knows why, but it happened.
And then, on Wednesday, fellow social media giant Meta Platforms Inc. (Nasdaq: META) hit the headlines after blowing the doors off earnings expectations.
A significant bump in ad revenue led the Facebook parent to beat analysts’ expectations in both earnings and revenue.
As a result, META stock popped almost 7% higher in trading Thursday.
Now, I’ve cautioned you before about trading on earnings or emotions … and under normal circumstances, this would be one of those times.
But I wanted to check and see how Meta rated on our Green Zone Power Ratings system.
The rating and the direction were both very surprising to me.
Meta Was Bullish Even Before Earnings
Meta rates 70 overall on our Green Zone Power Ratings system. That means we are “Bullish” on the stock and expect it to outperform the broader market by 2X over the next 12 months.
META earns a 99 on our Quality metric thanks to posting a gross margin of 87.3% and an operating margin of 28.1% — both stronger than the internet and data services industry averages.
The stock is also killing it on Momentum. In the last six months, META has climbed more than 108% with little volatility. That’s why it scores a 98 on our Momentum factor.
You can see that move in the chart below, but the second chart shows you what I really found out about META:
It shows how the stock has been rated on our Green Zone Power Ratings system over that same time.
While META has benefited from the investing herd jumping on any tech stock they can find, the stock didn’t actually reach a “Bullish” rating until late April.
With some of the volatility behind it, and buoyed by impressive earnings, META has positioned itself to keep climbing on our Green Zone Power Ratings system.
I’m not recommending you rush out and buy META stock. While it’s “Bullish” in the Green Zone Power Ratings, there are plenty of better buys that rate even higher (I aim for stocks rated 85 and above).
But I think META is certainly worth watching to see where it goes from here.
If it does cross above that 85 threshold, rest assured, I will be right back here to tell you about it.
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets