stocks · Friday, May 1, 2026 · 3 min
Buy Meta at $612.76, Stop $598.00: Earnings Beat Lost in Capex Noise
Meta gapped down 9.2% despite beating on revenue and EPS because it raised 2026 capex by $10B at the midpoint. The selloff looks disproportionate to the actual results.
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Aim for $630.00: 50-day SMA currently at $630.39, the first overhead moving average
Aim for $660.00: Pre-earnings consolidation low from April 23 ($659.15), lower bound of the $660 to $680 range META traded before the report
Why this size: Risk 0.5% of account at the stop. Stop is 2.41% below entry ($612.76 to $598.00 = $14.76). Computed position = 0.5% / 2.41% = 20.7% of account. Capped at 8% to limit single-name exposure in a stock with elevated post-earnings volatility.
When you'd hold this: 2 to 4 weeks, around Post-earnings institutional rebalancing through mid-May 2026
Meta Platforms gapped down 9.2% after reporting Q1 2026 earnings that beat on revenue ($56.3B vs. $55.5B expected) and adjusted EPS ($7.31 vs. $6.79 expected), but raised its 2026 capital expenditure forecast to $125B to $145B, up from $115B to $135B1. The market punished the higher spend, sending the stock from $669 to $612, even as Alphabet surged 11.8% on its own earnings beat and a 63% jump in Cloud revenue2. The selloff looks out of proportion: META is growing revenue 33% year-over-year with 41% operating margins and $12.4B in quarterly free cash flow1. Capex anxiety is real, but the earnings power underneath it is intact.
Why this dip is buyable
The earnings beat was broad, not a single-line fluke. Revenue of $56.3B topped estimates by $800M. Ad impressions grew 19% while average price per ad rose 12%1. Free cash flow climbed to $12.4B from $10.3B a year earlier. The business is generating more cash than ever, even after absorbing the spending ramp.
The capex raise was smaller than the reaction implies. The midpoint rose $10B, driven by "higher component pricing and additional data center costs"1, not a shift in strategy. Alphabet raised its own capex by $5B at the midpoint to $180B to $190B and was rewarded with a 10% pop2. The market is applying a double standard: spending is tolerated when Cloud grows 63%, but punished when the return shows up as stronger core ad revenue instead of a distinct new segment.
The user decline was geographic, not structural. Daily active people came in at 3.56B, below the 3.62B estimate, but the shortfall was driven by internet disruptions in Iran and restricted WhatsApp access in Russia3. Neither factor reflects weakening engagement in Meta's core markets.
The stock held $600 support on heavy volume. Yesterday's intraday low hit exactly $600.00 on 52.7M shares (roughly 5x the recent average), and buyers stepped in4. Today's low of $606.11 confirms that level is being defended. The 50-day SMA at $630.39 sits as the first overhead target4.
Alphabet's results remove the sector risk. If the digital advertising market were slowing, both GOOGL and META would be down. Alphabet's 19% growth in Search revenue and 63% Cloud acceleration confirm the demand environment for ad-driven tech is healthy2.
What would change the thesis
A close below $598. If META fails to hold the $600 zone on a closing basis, the next support is the March 20 close near $594, and below that the March 26 to 27 selloff zone of $525 to $548. A close under $598 means the dip is deepening, not stabilizing.
A Q2 guidance revision or a second capex raise. The current Q2 revenue guidance of $58B to $61B is solid1. Any pre-announcement cutting that range would signal the ad business is decelerating, which is a different problem than spending more.
A sustained decline in daily active users outside Iran and Russia. The geographic explanation is testable: if Q2 user numbers rebound, the concern evaporates. If they do not, engagement problems are real.
Broader AI capex backlash spreading to fundamentals. A Wall Street Journal report that OpenAI missed internal revenue targets already dragged NVDA down 4.4% today5. If more evidence emerges that hyperscaler AI spending is producing diminishing returns, the capex narrative worsens for all large spenders, META included.
Not financial advice. Do your own research.
What we passed on
- $GOOGLMIXED-1.5% since pass
RSI 86.77 (extreme overbought)6, up 11.8% on an earnings gap to a new 52-week high of $386.75; chasing a gap this large carries significant mean-reversion risk.
- $AMDMISSED+43.4% since pass
RSI 83.33 (extreme overbought)7, trading at a 52-week high of $358.74 and 52% above its 50-day SMA of $235.34; far too extended to initiate.
- $MUMISSED+83.2% since pass
RSI 76.74 (overbought, approaching extreme)8, up 6.89% today to a 52-week high of $545.91; strong trend but not a level to start a position.