Meta Platforms faced a challenge with a $16 billion tax charge in its Q3 earnings, causing its stock value to fall. The company reported a GAAP earnings per share of $1.05, missing Wall Street’s expected $6.71 due to this tax charge from new laws. On Thursday, META’s stock dropped over 11% and continued to decline on Friday. However, there is hope for recovery, as the tax changes could lead to lower future taxes and better earnings down the line. Without the tax charge, adjusted earnings were $7.25, exceeding expectations with a 20% increase from last year. The advertisement sector performed strongly, with a 14% rise in ad impressions and a 10% boost in ad prices. CEO Mark Zuckerberg mentioned promising growth predictions for Facebook Reels, expecting more annual revenue. However, concerns remain about high spending on AI and other projects that may not provide quick profits. Plans for a $30 billion bond sale to support investments raise concerns about financial stability due to previous losses in Reality Labs. Analysts warn of possible stock price declines because of technical gaps. The stock chart shows volatility, making it hard to attract buyers willing to take risks. The steep sell-off in META stock has created a high-volatility environment, attracting derivative traders. The difference between the poor official earnings and the positive adjusted numbers suggests that the stock could change direction sharply in the coming weeks. This means implied volatility on options will likely stay high, making strategies that benefit from price changes particularly appealing. For traders expecting more downturns, the technical gaps around $611 and $558.50 offer clear targets for bearish plays. Concerns about the large capital investment in AI, financed by the new $30 billion bond sale, support this negative outlook. Buying put options set to expire in late November or December 2025 could be a direct strategy to profit from this expected decline. Conversely, there is also a strong case for a rebound, as the core advertising business is growing with double-digit increases in impressions and pricing. Some traders might view the tax charge as a one-time issue, creating an opportunity to buy call options at a lower price. This approach bets that the market will soon return its focus to the company’s solid performance and work to close the significant price gap caused by the drop. Given these mixed signals, a direction-neutral strategy that benefits from volatility is also wise. A long straddle, which involves buying both a call and a put option at the same strike price and expiration date, could be profitable if the stock moves significantly in either direction before the expiration date. This strategy relies on the uncertainty surrounding the company’s future actions and the market’s final judgment. We have seen this kind of investor worry before, especially during capital spending cycles. In 2023 and 2024, the market often worried about Meta’s heavy spending on AI and the metaverse, but the stock usually recovered as revenue growth proved strong. The global digital ad market, which grew by about 8% in 2024, has shown it can support such investments, hinting at a possible recovery ahead.

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