Shares of Meta Platforms (NASDAQ:META), the parent company of Instagram, Facebook, and WhatsApp, rose on Tuesday despite the reduced price targets. Ahead of Q2 results, analysts following Meta Platforms are mostly pessimistic due to challenging comparables and a softening macro backdrop.
Jefferies and Credit Suisse Cut Price Targets on Meta
Jefferies Financial Group (NYSE:JEF) analyst Brent Thill cut its stock price target on Meta to $275 from $310, but sees a “compelling” valuation. Thill sees “undemanding” expectations with Meta facing a “first-ever y/y rev decline in Q2 and guidance of mid-single-digit rev growth in Q3.“
Credit Suisse (SIX:CSGN) analyst Stephen Ju also cut the price target on Meta to $245 from $273 to reflect lower EPS estimates for 2022 and 2023.
Ju said in a note to clients: “We have hence taken a more conservative 2H22 stance and forecast ad revenue growth of ~1% on a reported basis for 3Q22 (FXN +8%) and -3% for 4Q22 (FXN +3%). We have also decreased our ad revenue growth estimate for 2023 to ~11% FXN. We maintain our Outperform rating on the following: potential for better-than-expected ad revenue growth on product innovation (Facebook) Shops, Search in Marketplaces, etc.), Street models are too conservative and underestimate the long-term monetization potential of other billion-user properties like Messenger and WhatsApp, optionality for faster FCF growth on greater efficiency on content screening/security costs.”
Ju Cut EPS Estimates for 2022/2023
In addition, Credit Suisse Analyst Stephen Ju lowered his earnings per share estimates for 2022 and 2023 to $13.74 and $14.24 from $14.25 and $15.25. He said news flow for the tech giant should “get better from here”.
However, the analyst has concerns about the monetization of Reels.
“Reels monetization will hence be less about user demand but rather a function of ongoing user experience improvement through investments in AI and ensuring (small and medium business) adoption in lockstep with larger advertisers,” Ju wrote in a note to clients.
Nonetheless, Chris Cox, Meta’s Chief Product Officer, recently highlighted monetizing Reels as a priority for the year’s second half.
Meta Platforms will release its second-quarter results on July 27 after market close. Ju added that he expects a quarter “in line”, with weaker growth potential in the year’s second half due to concerns about the global economy and “flat” advertising budgets.
An analyst consensus expects Meta to earn $2.60 per share on revenue of $29.05 billion for the second quarter.
Earlier in July, Meta Platforms announced it would allow Facebook users to have up to five different profiles under their Facebook accounts. Users will still need to have only one Facebook account, with a primary profile that continues to use the person’s real name. Users will be able to access any additional profiles they create after logging into this account.
Instagram to Get a New Checkout Feature
Meta Platforms announced Monday that Instagram would get a checkout feature allowing users to buy from small businesses through direct messages.
Meta said users of the photo-sharing app will be able to track the order and ask the company follow-up questions in that same thread.
The company added that users can add customizations if needed and place the order in the chat.
To expand its e-commerce offerings, Meta has introduced several new features that use its Meta Pay payment service to make purchases.
To enable people to find and buy products on Facebook and Instagram, Meta launched Shops in 2020.
Accused of privileging extremist content to grab users’ attention, Meta recently published its first annual report on its efforts to protect human rights.
Featured Image: DepositPhotos @ismagilov
