Options Traders Unfazed by META's Worst Day Since 2022

Meta Platforms (META) is experiencing its worst single-session decline since October 2022, falling 12.4% to $659.21, despite reporting third-quarter earnings and revenue that exceeded estimates. The significant sell-off is attributed to investor concerns over upwardly revised AI capital expenditures, prompting 15 price-target cuts and causing the stock to breach its 200-day moving average. This negative reaction to increased AI investment is also impacting the broader tech sector, including Microsoft, despite previously strong analyst sentiment and continued call-skewed options activity.

Analysis

Meta Platforms (META) is experiencing a significant single-session decline of 12.4% to $659.21, marking its worst day since October 2022. This sharp sell-off occurred despite the company reporting Q3 earnings of $7.25 per share and revenue of $51.24 billion, both exceeding analyst estimates. The negative market reaction is primarily driven by investor concerns over upwardly revised AI capital expenditure forecasts, which are also weighing on the broader tech sector, including Microsoft.

The stock has breached its 200-day moving average for the first time since early May, indicating a potential shift in technical sentiment. This decline was exacerbated by 15 price-target cuts, with Barclays lowering its target from $810 to $770. Despite this, 51 of 57 brokerages still maintain "buy" or better ratings, and the consensus 12-month price target of $843.60 represents a 28% premium to current levels.

Despite the bearish price action, options traders exhibit a call-skewed sentiment, with a 10-day call/put volume ratio of nearly 2.00. Today's trading saw over 742,000 META calls change hands, seven times the average intraday amount and more than double the puts exchanged. The weekly 10/31 700-strike call is particularly active, suggesting some investors anticipate a rebound or are hedging existing positions.

Key Decisions for Investors

• Monitor META's ability to articulate a clear return on investment for increased AI capital expenditures, as this is the primary driver of current investor concern.
• Evaluate the stock's technical support around its +12% year-to-date level, given the breach of the 200-day moving average and the potential for further downside.
• Consider the divergence between the strong analyst consensus price target and current market sentiment, potentially indicating an overreaction or a fundamental shift in perception regarding future growth drivers.