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The most important thing right now for me is a nuance in Meta earnings.
Revenue beat last night but the stock dropped 6%.
Why?
Well there was an earnings per share miss.
But the important part here is this is a complete buying opportunity.
Why, David? Surely they’re doing worse?
Well, the reason for the EPS miss is because of a one time tax cost.
That has absolutely zero basis on the fundamentals of the business, or what they’re expected to earn next quarter.
THE REVENUE BEAT AFTER ALL.
So paradoxically, this dynamic has created a huge relative change in future pricing expectations.
See right now, the stock is trading at a steeper discount than if it were to NOT have had this one time tax charge impacting EPS, relative to future revenues.
We talk about this in a segment of the Academy called the Surprise Premium, as well as the segments on volatility around earnings and how to trade earnings events.
A very simple question you can ask yourself is ‘is this company more or less likely to make more money next quarter?’
That should form the basis of EVERY investment you make.