META stock was trading at $101.62 as of 10:36 AM EDT.

As the company alters its operations, KeyBanc downgraded  Meta stock (NASDAQ:META), citing a higher cost environment. Additionally, Morgan Stanley lowered its stock rating. Analyst Justin Patterson at KeyBanc lowered the stock from its Overweight to Sector Weight.

Following poor earnings that included a revenue warning, Meta stock is down 20% in premarket trade. Patterson noted in a note that “We believe Meta is undergoing a corporate transformation in a tough macro, privacy, and competitive environment. Although the development of a short-form video gives us hope, we anticipate that investments in data centers and R&D will likely raise operating costs in the medium term, preventing Meta from returning to 2019 margins.

META Stock Analysis

In his positive scenario, “Meta returns to a 35% growth profile, and management takes steps to slow the pace of expense increase,” but in his negative scenario, “EPS growth decelerates, reflecting notably weaker margins from elevated investment and competition with TikTok and other short-form video platforms,” are the underlying assumptions.

Meta stock was downgraded by Brian Nowak of Morgan Stanley from Overweight to Equal Weight, with a new price objective of $105 per share. As META adapts to the post-IDFA social media world, which is more driven by short-form video than social content/signal, the company’s investments appear to be “an indication of greater required structural capital intensity going forward,” he said. “It is uncertain and likely to take some time – far into 2023? for these efforts to have a material impact on engagement and income. Meanwhile, we observe that earnings power is still declining. 

Meta Stock Drops 12% On Earnings Shortfall And Revenue Concerns

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