Meta Platforms (NASDAQ:META) is set to publish its earnings report on Wednesday, April 30, 2025. Historically, the stock’s response to earnings has been fairly balanced, with a 50% probability of a positive one-day return and a 50% probability of a negative one-day return. In cases of positive returns, the median has been 7.7%, while negative returns have demonstrated a median of 4.7%. Separately, will it beat or not? See: How Will MSFT Stock React To Its Upcoming Earnings?
For event-driven traders, grasping these historical trends may provide a potential advantage. There are two main strategies:
- Pre-Earnings Positioning: Evaluate the historical likelihood of varied outcomes and set a position before the earnings announcement.
- Post-Earnings Reaction Analysis: Investigate the relationship between the immediate stock response and medium-term returns following previous earnings announcements, and then position accordingly after the results are revealed.
Beyond short-term trading insights, Meta’s underlying financial health appears strong. The firm currently has a market capitalization of $1.4 trillion. Over the past twelve months, Meta generated $165 billion in revenue, achieving a robust operating profit of $69 billion and a net income of $62 billion.
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META Stock Historical Chances Of Positive Post-Earnings Returns
Some insights on one-day (1D) post-earnings returns:
- There are 20 earnings data points noted over the last five years, with 10 positive and 10 negative one-day (1D) returns recorded. Overall, positive 1D returns occurred roughly 50% of the time.
- Interestingly, this percentage rises to 55% if we analyze data for the last 3 years instead of 5.
- Median of the 10 positive returns = 7.7%, and median of the 10 negative returns = -4.7%
Additional information for observed 5-Day (5D) and 21-Day (21D) returns post earnings are compiled along with the statistics in the table below.
META Stock Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky approach (although not helpful if the correlation is minimal) is to comprehend the relationship between short-term and medium-term returns after earnings, identify a pair that has the highest correlation, and execute the appropriate trade. For instance, if 1D and 5D display the highest correlation, a trader can take a “long” position for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D indicates the correlation between 1D post-earnings returns and the following 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, peer performance can affect post-earnings stock reactions. In fact, the pricing-in may commence prior to the earnings announcements. Below is some historical data regarding the recent post-earnings performance of Meta Platforms stock in comparison with the stock performance of peers that reported earnings just before Meta Platforms. For a fair comparison, peer stock returns also reflect post-earnings one-day (1D) returns.
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