Meta Attracts Bullish Option Trade Amid Reports of Metaverse Cost Cuts: Options Chatter
$Meta Platforms (META.US)$ attracted a bullish block trade worth almost $7 million of optionsas the stock advanced after a report that the social media giant is considering cutting spending for the company's metaverse group.
Shares rose as much as 5.7% Thursday after Bloomberg reported that CEO Mark Zuckerberg is looking at cuts of as much as 30% on a business segment that investors viewed to be a drain on the company's financial resources.
That cut could lower Meta's operating expenses by between $5 billion and $6 billion, Bloomberg Intelligence analysts Mandeep Singh and Robert Biggar wrote in a note Thursday.
At 9:39:49 a.m. in New York Thursday, an active seller earned a $6.7 million premium for unloading put options that could give their holders the right to sell 100,000 Meta shares at $710 in 78 days. That is the third biggest bullish stock option trade so far, behind $Amazon (AMZN.US)$'s $7.02 million transaction, and $Microsoft (MSFT.US)$'s $6.98 million.
That bullish Meta trade would be profitable for the seller should the stock climb well above that strike price, from its current level of $666.19, allowing the contract to expire worthless.
The seller of those put options isn't the only one bullish on Meta's stock. More than 90% of the analysts who cover the stock have a buy rating on Meta, with an average price target of $857.43, implying an upside potential of more than 25% for a stock that has already more than doubled in the past two years.
Cost cuts, along with the company's potential use of $Alphabet-A (GOOGL.US)$'s tensor processing units (TPUs), instead of its own application-specific chip (ASIC) could improve Meta's free cash flow by $10 billion to $12 billion from previous Wall Street consensus, Bloomberg Intelligence analysts said.
The spending cuts could help cushion the impact from the company's capital spending on artificial intelligence of as much as $110 billion, the analysts said. Before the cost cuts, the company was expected to positive negative free cash flow as its burgeoning spending on AI drains its finances.
Share your thoughts on Meta in the comments section. Do you see Meta's stock rally continuing through next year? Let your voice be heard by voting below. And if you want to read more options columns like this one on Netflix, or this one Palantir, follow me here, where you can also find my earnings stories on some of the biggest stocks.
Disclaimer: Options trading entails significant risk and is not appropriate for all customers. It is important that investors read the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Opening new options positions close to or on their expiration date comes with substantial risk of losses for reasons that include potential volatility of the underlying security and limited time to expiration. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period. Certain complex option strategies carry additional risk, including potential losses that may exceed the original investment amount. If applicable, supporting documentation for any claims will be furnished upon request.
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Luzi Ann Santos
Moomoo Senior News and Community Manager
Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
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Raxma Faarax : $SSE Commercial Index (000005.SH)$
75394006 : maybe the seller thinks it's going to 500 and got out now lol