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Meta Platforms Inc. (META) stock fell nearly 1% in Monday's premarket trading, despite gains in broader technology stocks, as investors positioned themselves ahead of the company's Oct. 21 earnings report.
Nasdaq futures climbed 1.33%, while S&P 500 futures rose 0.64%.
Meta's upcoming earnings report is drawing investor attention as traders assess advertising performance, AI investments and future growth prospects.
The stock has also pulled back after approaching its 52-week high. As a result, some investors may be taking profits ahead of the report.
Meanwhile, Meta's expanding AI business is showing early promise, although questions remain about user engagement and monetization.
According to BNP Paribas senior analyst Nick Jones, Meta's Muse AI app has surpassed 10.4 million downloads since its Sept. 8 launch. Downloads peaked on the 12th day before stabilizing through day 38.
Early U.S. downloads outpaced those of OpenAI's ChatGPT and Sora, partly benefiting from Meta's massive user base across Facebook, Instagram and WhatsApp.
However, Jones flagged a key challenge. Muse's mobile app open rate has stabilized below those of ChatGPT, Google and Meta's existing apps. Its 14-day user retention also trails ChatGPT, raising concerns about sustained engagement.
Additionally, adoption remains concentrated among male users, while younger consumers account for a relatively small share.
Despite these challenges, Jones sees opportunities for Meta to strengthen Muse's appeal.
The company's Oct. 12 launch of Muse Wonder could help attract more users. Although the technology primarily targets enterprises and developers, it will also power Muse, initially for paid subscribers.
Meta currently offers a free basic tier alongside paid subscriptions for higher usage. It also earns small transaction fees through partnerships.
However, long-term monetization remains uncertain. Advertising could eventually become a larger revenue opportunity if engagement improves.
Jones also highlighted competition from Alphabet Inc. (GOOGL), xAI and OpenAI's Dots platform, alongside potential privacy and security risks.
For now, BNP Paribas considers daily active users and retention critical measures of Muse's progress. Steady downloads without corresponding growth in daily usage could signal the need for product improvements.
Nevertheless, Jones maintained a bullish outlook on Meta, with an $885 price forecast. That implies approximately 20% upside from the stock's Oct. 15 price of $736.70.
The analyst expects Meta's extensive social media ecosystem to support continued adoption, even as the company works to turn early interest into lasting engagement.
Meta continues to trade above key long-term moving averages despite recent weakness.
The stock is 7.7% above its 50-day simple moving average (SMA) of $655.24 and 11.7% above its 200-day SMA of $631.98.
An October golden cross, a bullish technical signal, further supports the longer-term outlook.
However, Meta trades 4% below its 20-day SMA of $735.77, suggesting near-term selling pressure.
The relative strength index (RSI) stands at 50.09, indicating neutral momentum after the stock reached overbought levels in September.
Traders are watching resistance near $780, just above the 52-week high of $779.82. Meanwhile, $577 remains a longer-term support level if selling intensifies.
Meta is scheduled to report earnings Wednesday, Oct. 21.
Analysts expect earnings of $5.89 per share, down from $7.25 a year earlier. Revenue is projected to climb to $63.36 billion from $51.24 billion.
The stock trades at a price-to-earnings ratio of 26.7.
Wall Street maintains a consensus Buy rating, with an average price forecast of $797.92.
Recent analyst actions include JPMorgan maintaining an Overweight rating with a $920 price forecast on Oct. 15.
Citigroup maintained its Buy rating and raised its price forecast to $895 on Oct. 15. Goldman Sachs also maintained its Buy rating, with a $762 price forecast on Oct. 14.
Meta's MarketDash Edge Rankings reflect strong growth and quality, alongside more balanced momentum and valuation.
The company scores 77.13 for quality and 74.86 for growth. Its momentum score stands at 68.51, while value comes in at 47.38.
These rankings suggest solid business fundamentals, although the stock remains sensitive to earnings results and future guidance.
Meta is a major holding in several exchange-traded funds, including the Invesco AI and Next Gen Software ETF (IGPT), with an 8.32% weight; Natixis Loomis Sayles Focused Growth ETF (LSGR), at 9.04%; and VanEck Communication Services TruSector ETF (TRUC), at 9.38%.
Their exposure means Meta's price movements can have a significant impact on fund performance.
Meta shares fell 0.67% to $704.57 in Monday's premarket trading, according to market data.
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