TOP 3 stocks for February 2023 - Meta, NIO, Virgin Galactic

Which 3 stocks were the most traded in February 2023?

Earnings season is coming to a close in the US stock markets and there has been no shortage of surprises. Overall, the results of US companies clearly point to a slowing trend in stock markets, which was probably inevitable given the rise in interest rates. The stock markets are currently experiencing a year-on-year decline in profits of almost 5% (S&P 500). Few things can cause volatility in stock prices as much as economic results. Purple Trading clients know this, and they focused their attention on the following 3 stocks during February.

Stock #1: META - is the current growth exaggerated?

Since the beginning of the year, Meta's stock is up 40%, clearly beating the market. Investors were pleased with the Q4 results last year and Mark Zuckerberg's words that 2023 will be a year of efficiency and significant change. Let's take a look at exactly what Meta reported and why investors should still be cautious.

What went well:

• Revenue came in at $32.17 billion, beating market expectations.
• The number of daily active users also exceeded market expectations, reaching 2 billion.
• Capital expenditure is expected to come down to USD 30-33 billion this year, from USD 34-37 billion that was expected.
• Meta bought back USD 28 billion of its own shares last year. It has now agreed to another USD 40 billion in new buybacks.

What went wrong:

• While sales were better than expected, they fell 4% year-on-year. In addition, this is the 3rd consecutive quarter of year-on-year sales declines.
• For Q1, Meta expects sales of $26 billion to $28.5 billion. A year earlier, sales were USD 27.9 billion. So we may be in for another year-over-year decline.
• Q4 earnings fell 55% year-over-year to $4.65 billion.
• The number of monthly active users came in at 2.96 billion, the market was expecting 2.98 billion.
• Meta grew by 86,000 employees last year, about 20% of its total workforce. About 11,000 of them were laid off by the company in November, and more layoffs are likely to follow. Exceeded company growth will cost Meta more in severance costs.
• Reality Labs, under which Meta develops Metaverse, posted a loss of nearly $14 billion last year.

_{Shares of Meta Platforms in the MT4 platform on the D1 timeframe along with the 50 and 100-day moving averages}
 

From the text above it is clear that both bears and bulls found their own on the Meta results. The latter clearly won, with Meta shares up more than 20% after the results, as can be seen in the gap chart above. However, after such a meteoric rise, made at the beginning of the year, a great deal of caution is in order.

Indeed, question marks hang over the ability of individual apps to grow. Thanks to Apple's new privacy settings, for the first time ever, Meta's ad revenue did not increase year-over-year. In addition, TikTok, which is beginning to steal more and more market share, is a significant competitor. The other big unknown is Metaverse, which is proving to be a huge misstep. In this time of cost-cutting, there is not much room for investment in expensive VR equipment among consumers, and the same goes for Metaverse advertisers.

According to Mark Zuckerberg, this year should be the year of efficiency, so the company should save costs. Lower investment in Metaverse would definitely help, but Mark Zuckerberg doesn't want to give that up. The results for the next quarter will tell us more about Meta's future - but it is quite possible that the stock growth from the beginning of the year will prove to be exaggerated. So we expect a lot of volatility in Meta stock going forward. The wishful thinking of all shareholders may be a ban on TikTok in the US, which has long been discussed. However, its reality is still unlikely.

Stock #2: NIO - are new lows coming?

In second place for the most traded stock at Purple Trading for February 2023, we find a Chinese stock - specifically NIO. It is some kind of hybrid between a technology company with ambitions to break down barriers to the development of electric vehicles and a conventional carmaker.

As you might have already noticed, car companies focusing on electric cars like to be labeled as technology companies because it helps them to attract more investors. NIO, however, has not pleased investors much since the beginning of the year, with its stock down nearly 10%. So the stock rally in technology stocks has not affected it much. February was particularly bad for NIO, during which the stock wrote off nearly 25%. So it was clearly paying to speculate short here. What is the outlook?
 

_{NIO shares on the MT4 platform on the D1 timeframe along with the 50 and 100-day moving averages}
 

NIO reported Q4 results on the first day of March and did not make investors too happy. The loss widened year-on-year from 2.2 billion yuan to 5.8 billion. For the full year 2022, the automaker then reported a loss of 14.6 billion yuan, a 40% year-on-year increase. The market was expecting a significantly smaller loss. However, the outlook for car sales revenue was more positive, with NIO increasing sales by 60% to 14.8 billion yuan in Q4. For the full year then, the company made 45.5 billion yuan, up 37% from 2021. However, the outlook for the current quarter is again not very positive, NIO is expected to deliver 31 to 33 thousand new cars. That would be a year-on-year growth of 21% to 28%. The market was expecting much better numbers and also significantly higher sales. For such a loss-making company, such a growth rate is unsatisfactory.

Thus, expanding production carries significantly higher costs for the company and its ability to be profitable in the future is in the stars. There is little room in the portfolios of speculative investors for such a significantly loss-making company. While the stock price is now near a one-year low, it was well below $3 in 2020. Given the weak outlook, deepening losses, and overall negative market sentiment, we expect more of a continuation of the downtrend from February and the creation of new annual lows.

Stock #3: Virgin Galactic - 2023 as the year of truth?

Virgin Galactic shares have long been one of the most popular among Purple Trading clients. Looking at their volatility, it is no wonder. Since the beginning of the year, the stock has gained 35% as part of a rally in technology stocks, despite having written off 25% during February.

Indeed, they entered the year at an all-time low of around $3. Not surprisingly, Virgin Galactic's shuttles have had hardly any airtime since the summer of 2021 and the company has generated almost no revenue. During that period, the company did necessary maintenance and also made improvements to its shuttles. These are expected to take more tourists to space in the second quarter of this year.
 

_{SPCE shares on the MT4 platform on the D1 timeframe along with the 50 and 100-day moving averages}

The company’s results from the second quarter are also not revolutionary. Virgin Galactic doubled its loss year-on-year to CZK 133 million. The company posted virtually zero sales. Importantly, however, it still has a queue of 800 clients eagerly awaiting their journey into space. Moreover, the company still has $980 million in cash. Since February, new seat tickets have been put back on sale, costing $450,000 - $150,000 of which is paid in advance. Each flight lasts about 10 minutes and carries passengers 80 km above the Earth's surface.

Successful completion of the tests, which are scheduled for the next few months, will be extremely important for the further development of the shares. Then the first commercial flight should take place when Virgin Galactic will carry members of the Italian Air Force to the edge of space. After that, flights for the general public should be launched again. A further postponement of the planned flights would probably send the shares back to a yearly low. In addition, the company may have funding problems as it is burning cash at an extreme rate and has virtually no revenues. So this year may be the year of truth for Virgin Galactic. However, we cannot expect a similar frenzy around Virgin Galactic as in 2021, when the stock price broke even the $60 mark.