What Happened?

Shares of social network operator Meta Platforms (NASDAQ: META) jumped 3.5% in the afternoon session after analysts raised their price targets on the stock, following the company's strong second-quarter earnings report the previous week. 

The technology giant reported that its second-quarter revenue grew 22% year-over-year to $47.52 billion, while its earnings per share jumped 38% to $7.14, both beating Wall Street estimates. Management attributed the strong performance to artificial intelligence unlocking greater efficiency across its advertising system. Following the impressive results, Barclays increased its price target on the stock to $810 from $640, and other investment firms also issued more optimistic reports. 

Also, a surprisingly weak July jobs report fueled expectations that the Federal Reserve would cut interest rates to support the economy. Data released on Friday showed the U.S. economy added only 73,000 jobs in July, significantly below forecasts, with downward revisions to previous months compounding concerns of a slowdown. This weaker-than-expected economic data is paradoxically lifting investor spirits. The logic follows a 'bad news is good news' narrative, where a faltering labor market could compel the Federal Reserve to act sooner to stimulate the economy. 

Following the report, the probability of an interest rate cut at the Fed's September meeting surged, with the CME FedWatch tool indicating traders now see an 85% chance. Lower interest rates generally reduce borrowing costs for companies and consumers, which can encourage spending and investment, thereby boosting stock prices. The rally comes after a sharp sell-off last week driven by the same jobs data and new tariff announcements.

After the initial pop the shares cooled down to $774.95, up 3.3% from previous close.

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What Is The Market Telling Us

Meta’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 4 days ago when the stock gained 12.1% on the news that the company reported second-quarter financial results that far surpassed Wall Street's expectations. The company reported revenue of $47.52 billion, a 22% year-over-year increase that beat forecasts of $44.83 billion. Earnings per share jumped 38% to $7.14, which also topped the consensus estimate of $5.89. This growth was fueled by an 11% rise in ad impressions and a 9% increase in the average price per ad. The company noted that advancements in Artificial Intelligence helped boost its core advertising business. Meta also provided an optimistic outlook and forecasted third-quarter revenue above what analysts had anticipated. The strong results from the S&P 500 heavyweight lifted sentiment across the broader technology sector.

Meta is up 29.3% since the beginning of the year, and at $774.95 per share, has set a new 52-week high. Investors who bought $1,000 worth of Meta’s shares 5 years ago would now be looking at an investment worth $3,102.

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