Meta Trading Guide: How to Trade Meta Shares CFDs

Meta is one of the biggest names in the global tech industry, with nearly half of the world’s population using one of its platforms as of 2024. Let’s take a look at how this economic leader took shape and how it may make a good addition to your personal trading portfolio:

TL;DR

• Historical Significance: Meta Platforms (META), formerly known as Facebook, evolved from a Harvard dorm room project to a leading global tech conglomerate, significantly impacting the social media landscape.
• Core Operations: As of 2024, Meta Platforms owns Facebook, Instagram, Threads, and WhatsApp, with advertising generating 97.8% of its revenue (in 2023), despite ventures into hardware and virtual reality.
• Trading Characteristics: Trading Meta share CFDs offers leveraged trading (without owning the underlying share), flexibility, and exposure to both rising and falling markets.
• Risk Factors: Trading Meta CFDs involves high volatility, regulatory scrutiny, intense competition, and dependence on advertising revenue, highlighting the need for careful market analysis and risk management.

What Is Meta?

As one of the most important firms in the international technology space, getting a handle on Meta’s history from its beginnings in a Harvard dorm room to its prominent place in social media is important for those looking to incorporate Meta share CFDs into their trading strategy.

The California-based conglomerate owns and operates Facebook, Instagram, Threads, and WhatsApp, positioning it among the largest U.S. tech companies alongside Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), and Microsoft (MSFT). Meta was ranked #31 on the Forbes Global 2000 list in 2023. The company’s substantial R&D investments, totaling $35.3 billion in 2022, highlight its commitment to innovation.

Meta’s acquisitions list includes Oculus, Mapillary, and CTRL-Labs. Despite forays into innovative hardware like Meta Portal smart displays and Ray-Ban Stories smart glasses, advertising remains the firm’s core revenue stream, making up almost 98% of its income in 2023. The rebranding from Facebook to Meta Platforms on October 28, 2021, marked a strategic pivot toward the metaverse—an integrated digital environment connecting the company’s diverse products and services. This shift aimed to expand beyond social media into virtual and augmented reality.

Meta’s IPO on May 18, 2012, was a milestone, raising $16 billion and setting a new trading volume record despite technical issues. The IPO valued the company at $104 billion, with Zuckerberg retaining significant control. This initial success solidified Meta's status as a tech giant. In May 2014, Meta updated its internal motto to "move fast with stable infrastructure," reflecting a more mature approach to growth. From 2018-2020, Meta focused on the metaverse, launching Lasso, a TikTok competitor, and investing heavily in VR through Oculus. The company also explored cryptocurrency with the Libra project, later rebranded as Diem, which faced regulatory hurdles and was eventually shut down in January 2022.

The COVID-19 pandemic drove increased use of Meta’s platforms, leading to significant growth in its workforce. However, the period was also marked by legal challenges, particularly concerning data privacy and content moderation. The rebranding to Meta Platforms came amid scrutiny and whistleblower leaks. Despite the ambitious vision for the metaverse, the company reported declining profits in early 2022, largely due to competition from TikTok and Apple’s privacy changes. These issues contributed to a substantial drop in Meta’s stock price, impacting its market valuation.

In July 2022, Meta reported its first year-on-year revenue decline, driven by reduced advertising revenue and increased competition. This led to significant layoffs, with 11,000 employees let go in November 2022 and further reductions planned for 2023. In 2023, Meta faced a record €1.2 billion fine for data transfer violations. However, its revenue exceeded expectations in Q1 2023 due to a renewed focus on artificial intelligence (AI). Meta launched Threads, a Twitter competitor, and unveiled the AI model Llama 2, emphasizing open-source development.

The company introduced an ad-free service in Europe in 2024, allowing users to opt out of targeted advertising, though this move faced privacy concerns. Meta continues to navigate innovation, regulatory challenges, and competitive pressures. Its strategic pivot towards the metaverse and AI, combined with a resilient stock performance, make it a critical entity for CFD traders to watch closely.

History of Meta's Stock Price

Over the years, Meta’s share price has seen high rises and significant drops in value, especially in the years since the global coronavirus pandemic. Despite the jump in user numbers observed during the lockdowns across the globe in 2020 and 2021, Meta’s transition into newer technology was fraught with challenges.

In 2022, Mark Zuckerberg led Meta’s charge into the still-forming Metaverse space, devoting much of the company’s budget to development of related technologies. However, with quarterly reports that year revealing the billions lost as this project struggled to get on its feet, Meta’s share price declined by almost 56% over the course of 2022, even hitting a six-year low in October.

Despite this somewhat difficult year, in 2023 Meta’s share price rebounded. The firm’s Q4 2022 earnings release turned out to outpace analysts’ predictions, and the relative easing of inflationary pressures on the American economy and a share buyback may have been behind the improvement in trader sentiment over the course of the first half of the year. By the time 2023 drew to a close, Meta’s share price was up by more than 190% over its starting point on January 1st, with annual revenue reaching $134 billion.

So far in 2024, Meta has continued its share price rally, with its stock value increasing by nearly 32% over the first five months of the year, even hitting an all-time high of $529.24 on April 5th. This sustained rise has even had analysts wondering if Meta may be the next Big Tech company to implement a stock split. However, keeping Meta’s volatile recent past in mind, it would behoove CFD traders to continue to monitor developments as they occur.

The Advantages of Trading Meta Shares CFDs

Trading Meta share CFDs offers several advantages. Here are some reasons you may wish to enter the CFD trading arena with Meta shares CFDs:

• Exposure to Both Rising and Falling Markets: You can speculate on both upward and downward price movements when trading CFDs. If you anticipate that Meta’s share price will rise, you can take a long position. Conversely, holding a short position may be appropriate if you predict a drop in stock value. This dual potential allows you to trade market volatility, although the risk of significant financial losses must also be taken into consideration. Market volatility may not be suitable for all trading strategies and risk management plans.
• Competitive Edge in Technology Sector: Meta Platforms, a leader in the tech sector, is heavily involved in developing Metaverse technology. However, the company faces intense competition from other giants like Microsoft, Apple, and Google. CFDs can allow traders to respond to market news and technological advancements in the industry where they believe market conditions suit their trading strategy and risk management plans.
• Long-Term Growth Potential: Although financial projections are always subject to revision, the long-term growth forecast for Meta as a company remains generally positive.
• Long and Short Positions: CFDs allow trading in both bullish and bearish markets.
• Accessibility: Online platforms make trading accessible from computers, tablets, or smartphones with internet connections.

Disadvantages of Trading Meta Shares CFDs

Along with the potential upsides of trading CFDs on Meta shares, several potential drawbacks must be considered as well:

• Controversies and Public Scrutiny: Meta faces significant criticism over data privacy breaches and regulatory scrutiny, which can impact operations and profitability.
• Misinformation and Mental Health Concerns: Facebook and Instagram have been criticized for spreading misinformation and negatively impacting users' mental health, potentially leading to stricter regulations and reduced user engagement.
• Cyclical Nature of Earnings: Meta's advertising revenue is highly cyclical, making its financial performance vulnerable to economic downturns and recessions.
• Intense Competition: New platforms like Twitter, TikTok, Telegram, and Viber increase user options and force Meta to invest heavily in research and development in order to keep up with its industry peers.
• Heavy Dependence on Advertising Revenue: Reliance on ad revenues means any disruption in the advertising market can significantly affect Meta's financial health.
• Regulatory Risks and Uncertainties: Ongoing regulatory scrutiny can limit Meta's reach and user base, adding uncertainty to its profitability and operational stability.
• No Voting Rights: Trading CFDs means you have no ownership rights over the underlying shares, thus you are unable to take part in the voting processes conducted for traditional shareholders.
• Volatility: Meta’s stock can be volatile. Compared to the overall market of share CFDs, Meta's price movements can be more unpredictable.
• Leverage: Trading Meta CFDs can be risky due to potential significant losses if the market moves unfavorably.

How to Trade Meta with CFDs

For those looking to participate in Meta stocks’ price movements without owning the underlying shares, traders may consider CFD trading.

Buying Meta Shares vs Trading CFDs on Meta

Owning physical Meta shares makes you a shareholder of the company. However, CFDs on Meta allow you to track the price movements of Meta shares without owning them. Instead, CFDs function as a contract with a CFD provider, such as Plus500, to exchange the difference in Meta’s price between the time you enter and exit the market.

CFD on Meta Shares Example

Imagine Meta shares are worth $300 per share, and you want to buy 10 shares (total value: $3,000). With CFDs, you can use leverage to trade Meta without investing the full $3,000 or owning the shares.

Using leverage of 1:5, you would allocate an initial margin of 20% ($600) to open a CFD position on 10 Meta shares. Profits occur if Meta’s price rises above $300, while losses occur if the price falls below $300. Additionally, overnight funding fees and other charges can affect your final profit or loss.

Different Ways to Trade Meta Stock

When trading Meta share CFDs, traders may wish to implement a variety of different strategies and trading styles into their personal approach to the CFD arena. Common approaches include:

• Technical Analysis: Studying Meta's stock price, trading volume, and historical price patterns to predict future price movements.
• Fundamental Analysis: Evaluating the company's fundamentals to determine its intrinsic value.
• Combined Approach: Using both technical and fundamental analysis for a comprehensive assessment.

Once traders decide on a market analysis method, they select a trading style based on their strategy, risk calculations, investment horizon, and availability.

• Day Trading: For proactive traders, this involves holding short-term positions for minutes or hours. It requires active monitoring and is high-risk.
• Swing Trading: For those preferring a less active approach, this involves holding positions for days or weeks to capture larger price movements. It is more flexible but provides greater exposure to broader market swings.
• Position Trading: This style involves holding a position open for a longer period of time in order to capture longer-term market shifts.

By selecting the appropriate analysis method and trading style, traders can better navigate the complexities of trading Meta share CFDs.

How to Trade CFD Meta Shares with Plus500 (Step by Step)

Here are a few steps that can guide you if you want to start trading Meta shares with CFDs (among other steps):

1. Gain an understanding of CFD trading’s mechanics, including its risks as well as potential benefits.
2. Research potential trading strategies.
3. Open your trading account on Plus500 & get verified.
4. Make a deposit.
5. Log in to the Plus500 trading platform.
6. Decide whether to buy Meta Shares CFDs (go long) or to short-sell them (go short).
7. Plan your order details, including setting stop-loss orders or taking advantage of other risk management tools.
8. Keep track of your position’s potential movements.
9. Take stock of your personal trading strategy and make adaptations as needed.

In Conclusion

Meta's journey from a Harvard dorm room to a tech giant showcases its significant impact on the social media landscape. For traders, understanding Meta’s history and current standing is crucial when incorporating Meta share CFDs into their trading strategies. Analyzing market conditions and selecting suitable trading styles can help navigate the complexities and potential rewards of trading Meta share CFDs, while always remaining conscious of the significant risks always present when it comes to CFD trading.

FAQs

What are some of the most popular trading strategies to trade Meta share CFDs?

Popular trading strategies for Meta shares include technical analysis, fundamental analysis, and a combined approach of both, tailored to the trader's strategy, risk tolerance, investment horizon, and availability.

What should I take into consideration when trading Meta share CFDs?

When trading Meta share CFDs, consider the company's historical performance, current market conditions, potential for volatility, regulatory challenges, and competition within the technology sector.

How can I trade on Meta's stock price?

You can trade Meta's stock price by purchasing physical shares or through CFDs, which allow you to speculate on price movements without owning the actual shares, using platforms like Plus500.

How can I get started with trading Meta share CFDs?

To start trading Meta Share CFDs, understand CFD trading mechanics, research strategies, open and verify a trading account on platforms like Plus500, make a deposit, and decide whether to go long or short based on your market analysis.

Is Meta a buy, hold, or sell?

Determining whether Meta is a buy, hold, or sell depends on your analysis of its market position, growth potential, and current financial performance amidst ongoing regulatory and competitive pressures.