Josh Brown says Meta is near crucial levels. How he's trading the tech giant

Meta has returned -14.5% since its Sept. 28 write-up, versus -1.5% for the S&P 500, after Q3 free cash flow turned negative at $2.1 billion from positive $10.6 billion a year earlier; its full-year capex guidance rose to $135 billion–$145 billion. The article says Meta’s technical setup is broken, with $664 a level to reclaim and $626 an investor risk level. Cloudflare has returned 0.7% since its Sept. 21 write-up, versus -0.2% for the S&P 500, and recovered to $326 after a 19% pullback; the authors describe its uptrend as intact ahead of Nov. 5 earnings, while noting its roughly 260x this year’s midpoint non-GAAP EPS guidance valuation.

Analysis

META’s issue is not simply one weak cash-flow quarter: the market is repricing the duration and funding burden of AI investment. If elevated capex persists while monetization lags, lower free cash flow can pressure the multiple even with healthy ad growth; a newly available share class adds financing flexibility, not evidence that external funding is imminent. Conversely, the settlement charge distorts reported operating income, so treating the headline decline as a deterioration in core operations overstates the near-term damage. The key test is whether ad growth and AI product use translate into returns on incremental investment. AI infrastructure suppliers, including Nvidia and data-center power and networking providers, could benefit if spending holds, but that is a second-order exposure, not proof of Meta’s investment returns.

NET offers the cleaner near-term trend, but not a cheap fundamental entry: traffic and agent-request growth do not establish paid demand or durable unit economics, and an earnings miss could rapidly compress a valuation anchored to optimistic growth. The Nov. 5 report is the next catalyst. Over days, technical resilience supports NET relative to META; over 1–3 months, earnings conversion and software risk appetite matter more; over 6–18 months, Meta’s capex returns and Cloudflare’s monetization determine whether either premium is justified. Contrarian risk: the META selloff may over-penalize temporary cash-flow pressure, while NET’s rebound may be mistaken for fundamental confirmation. No broad sector inference from either chart alone.

Key Decisions for Investors

• NET: Treat as a tactical, event-risk position rather than a valuation-backed core long. Prefer entry only after earnings if price holds above $299 and the report supports monetization; a close below $299 invalidates the near-term confirmation, while a weekly close below $285 breaks the larger uptrend. A clean move through $363 would strengthen the setup, not remove valuation risk.
• META: Do not chase a dip before stabilization. A recovery above $664 would improve the near-term technical picture; a weekly close below $626 would materially weaken the investor thesis. Reassess on capex guidance, free-cash-flow trajectory, and evidence that AI features improve ad economics—not adoption counts alone.
• Relative-value watch: NET over META is the better tactical expression while software risk appetite holds, but avoid a fixed-size short against META into a potential sharp reversal. Reduce or exit the relative position if NET closes below $299, or if META recaptures $664 and its next cash-flow update shows investment intensity moderating.
• Track the Nov. 5 Cloudflare release for revenue growth, remaining performance obligations or equivalent demand indicators, and cash-flow conversion; verify Meta’s subsequent capex and free-cash-flow outlook. Without evidence on monetization and investment returns, neither company’s AI usage metrics justify extrapolating returns.