ETF News & Views: Meta Stocks Prompt Surge in the Communication Services Sector (April 24 to 30, 2023)

In the last week of April, the communication services sector emerged as the top performer (+3.76%), driven by Meta stocks (META) which climbed by 12.88% (+99.70% year-to-date) in response to an unexpected rise in Q1 sales ($28.6 billion, +3% year-on-year), a return to growth after three straight quarters of declines. With the company exceeding analyst expectations for quarterly revenue and user growth, it has the flexibility to continue investing in more speculative businesses such as virtual reality (VR) and artificial intelligence (AI).   

Despite Meta's nearly 100% rally year-to-date, the stock is still down about 37% from its all-time high in 2021. Wall Street’s skepticism about CEO Mark Zuckerberg’s decision to heavily invest in the metaverse contributed to the stock’s rapid decline. Since changing its name from Facebook to Meta in Q4 2021, Meta has reported over $20 billion in losses in its metaverse segment. Meta's recent earnings report, however, has given investors renewed optimism about the company's prospects.   

 Reporting strong earnings, another tech giant – Google’s parent company, Alphabet (GOOG) – exceeded expectations in both profits and sales, further boosting the communication services sector. As a result, it has been the best-performing sector in the S&P 500 index this year, with gains of 24.46% as of 30 April, compared to its position as the worst-performing sector in the previous year.   

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