The NASDAQ Composite fell 0.5% an hour after the open on Thursday, as Meta Platforms dropped by more than 10%. The fall followed first-quarter earnings released late Wednesday.
Meta reported earnings per share of $10.44, or $7.31 excluding a one-time tax benefit, versus a consensus of $7.11. Revenue rose 33% year on year to $56.3 billion, compared with $55.5 billion.
Meta Raises Capital Spending Outlook
Meta lifted its full-year 2026 capital expenditure outlook from $115 billion–$135 billion to $125 billion–$145 billion. It said this was due to higher component prices, including semiconductors, and added data centre costs.
META shares fell from near $670 to about $600 during Thursday’s session. Meta spent about $72.2 billion on capex in 2025, while its Q2 revenue outlook stayed at $58 billion–$61 billion, implying about 25% growth.
JPMorgan cut its 12-month price target from $825 to $725. The stock is below the 50-day SMA near $630 and the 200-day SMA above $678.
Support levels cited were near $582 from November 2025 and $520 from late March. A gap level mentioned was April 29’s low at $663.81.
Options Volatility And Trading Strategies
The sharp drop in Meta’s stock today has caused a massive spike in volatility. We’ve seen implied volatility on near-term Meta options surge over 45%, making both puts and calls significantly more expensive. This environment makes selling premium, rather than buying it, an attractive strategy for the coming weeks.
With the stock now below key moving averages, bearish traders may target the support level from the November 2025 plunge near $582. Given the high cost of options, a bear put spread, which involves buying a put and selling one at a lower strike price, could be a cost-effective way to play further downside. This strategy caps both the potential profit and the upfront cost.
Conversely, the significant premium available makes selling cash-secured puts an interesting play for those who believe the sell-off is overdone. Collecting rich premiums by selling puts with a strike price at or below the late March support of $520 could be a way to either generate income or acquire the stock at a lower price. The updated JPMorgan target of $725 suggests some analysts believe this drop is a long-term opportunity.
We’ve seen this happen before when the market gets spooked by spending. Looking back from 2025, we recall the historic 26% plunge on February 3, 2022, after the company first outlined its massive metaverse investment plans. It took the stock well over a year to reclaim those highs, reminding us that concerns over heavy capital expenditure can weigh on sentiment for more than just a few sessions.
This appears to be a company-specific issue, not a wider market panic. While Meta fell over 10%, the broader NASDAQ only dipped by 0.5%, indicating that the concern is isolated to Meta’s aggressive AI spending plans. This allows traders to focus their strategies on a single stock’s story without necessarily betting against the entire tech sector.
