Key Points
- Meta Platforms and Tesla, both Magnificent Seven stocks, currently show RSI readings recovering from oversold territory, making them candidates for value-seeking investors.
- Meta's Q2 revenue rose 28% year-over-year despite its first EPS miss in 15 quarters, and it holds a consensus Moderate Buy rating with about 32% upside.
- Tesla missed Q2 EPS estimates for the fifth time in nine quarters and trades at a forward P/E of 384, though analysts still see roughly 18% upside.
- Special Report: The $15 Gold Fund That Pays Up to $1,152/Month
With the market trading sideways since mid-May, finding opportunities hasn’t been an easy task. But investors on the hunt for value can turn to oversold stocks to identify potential entry points. One popular gauge for determining that is the relative strength index (RSI), a momentum indicator that suggests when equities are overvalued, undervalued, or fairly valued.
According to the RSI, stocks are assigned a score from zero to 100. Readings over 70 are considered overbought and potentially due for a bearish price reversal. Conversely, stocks with readings under 30 are considered oversold and could be due for a bullish price reversal.
The following two companies, both of which are Magnificent Seven stocks, have RSI readings that recently rebounded from oversold territory, making them prime watchlist candidates for investors seeking value opportunities in an increasingly convoluted market landscape.
Despite Legal Challenges, Meta Is Positioned for Earnings Growth
Meta Platforms (NASDAQ: META) currently shows an RSI score of 48, a slight improvement from the 31 reading it saw on July 30, but still part of a broader downtrend that dates back to July 15, when its RSI of 66 was pushing overbought territory.
Coinciding with that recent RSI peak on July 15, shares of META have fallen roughly 10%, dragging the stock down 20% from its year-to-date high, which was reached on Jan. 29.
The stock’s poor performance this year is partly attributable to a familiar tale: sky-high capital expenditures on AI infrastructure have given investors the jitters.
That was compounded by Meta’s Q2 results on July 29, when it reported its first earnings per share (EPS) miss in 15 quarters.
But the EPS miss wasn’t the big story. Revenue of $60.8 billion beat analyst expectations of $60.22 billion, but more importantly, the quarterly figure marked a 28% year-over-year (YOY) increase.
Meanwhile, the company’s AI investments are beginning to pay off. Meta highlighted gains from its LLM-powered recommendations, including a 15.7% increase in Facebook ad conversions and continued growth in Instagram engagement. More than 9 million small businesses now use at least one AI creative tool, while Advantage+ products surpassed a $75 billion annual revenue run rate.
The Mark Zuckerberg-led firm did warn that the $2.4 billion in Q2 legal expenses—much of which is related to ongoing legal action over a youth social media addiction case—could continue to present headwinds, while Q3 revenue guidance in the range of $61 billion to $64 billion suggest more moderate growth than in Q2.
But that shouldn’t overshadow the strength of other metrics. Invested capital growth, for instance, has improved every quarter since Q3 2025, from 28.55% to Q2’s 44.17%. With a trailing price to earnings (P/E) ratio of 22 and a forward P/E of 20, Meta’s earnings are expected to grow nearly 21% over the next year, from $28.50 to $34.47 per share. The stock currently receives a consensus Moderate Buy rating, along with an average 12-month price target implying nearly 32% upside.
Investors Are Seeking Earnings Consistency From Tesla
On July 29, the RSI reading for Tesla (NASDAQ: TSLA) bottomed out at 25. That came a week after the EV maker reported Q2 results, including EPS of 33 cents, which missed analyst expectations of 50 cents, and revenue of $28.24 billion, which came in higher than the consensus forecast of $26.42 billion.
But as with Meta, the EPS miss grabbed headlines. Shares fell by more than 20% before bottoming—alongside RSI—on July 29. Since then, the stock has regained nearly 10%, but its YTD loss stands at 25%.
However, RSI continues to improve and is now up to 47, approaching 50, which is neutral territory. Tesla currently sports a consensus Hold rating, but the bull case is reflected in analysts’ average 12-month price target, which suggests about 18% upside.
That disconnect can be explained by wildly varying opinions of the stock on Wall Street.
Of the 45 analysts currently covering TSLA, only four assign the stock a Sell rating, but 19 assign it a Hold and 22 assign it a Buy.
Tesla’s earnings aren’t helping its case. Not only is the stock nearly twice as volatile as the broader market with a beta of 1.83, its latest EPS miss was its fifth in the last nine quarters. Additionally, YOY EPS growth has been all over the map. In the past three quarters, that metric went from nearly -61% in Q4 2025 to 8.33% in Q1 to -3.03% in Q2.
Shareholders are still paying a premium for those unpredictable earnings. Tesla’s forward P/E ratio stands at a staggering 384—among the highest in the S&P 500, meaning investors are paying $384 for every $1 the Elon Musk-led mega-cap company generates in earnings.
As EV adoption in the United States grinds to a halt and the company continues to struggle with its Robotaxi rollout, quarterly net income has fallen from $7.9 billion in Q4 2023 to $1.1 billion in Q2—an approximately 86% drop-off.
Still, Tesla’s earnings are forecast to grow nearly 57% over the next year, from 88 cents per share to $1.38 per share.
Read this article online ›
The best investment opportunities don't wait. Get our research and stock ideas delivered straight to your smartphone—so you never miss a market-moving opportunity. Our text alerts ensure you see timely stock ideas and professional research reports instantly, whether you're in a meeting, commuting, or away from your desk.
Get Text Alerts from American Market News (free)
No comments:
Post a Comment