Investing

Analysts Ponder How Bad Things Could Get for Meta Platforms

Paul Ausick

Published: February 3, 2022 11:08 am

Instead of an expected per-share profit decrease of around 1.3% year over year in the fourth quarter, Meta Platforms Inc. (NASDAQ: FB) reported a drop of 4% after markets closed Wednesday. Combined with the company’s weakish outlook for 2022, the stock was hammered Thursday morning. It posted a new 52-week low of $237.07, well below the 52-week high of $384.33.

The Nasdaq Composite index had just begun recovering from a 15% dip in the first month of 2022, but Meta’s report genuinely shook investors’ confidence in a robust tech stock recovery.

Even more damaging than Meta’s outlook for 2022 was downside guidance on first-quarter revenue. Analysts had been looking for revenue of around $30.3 billion, compared with first-quarter 2021 revenue of $26.17 billion. Meta now expects quarterly revenue in the range of $27 billion to $29 billion.

All this has sent analysts back to their spreadsheets and resulted in some new ratings and some big changes in 12-month price targets.

Barclays reiterated its Outperform rating while cutting the price target from $420 to $350. The analysts commented that following Meta’s conference call, “investors may start to question whether team Zuckerberg can salvage any growth” out of the company. Unsaid is whether the metaverse will arrive in time and with enough force to breathe life into the company.

BMO Capital downgraded the stock from Outperform to Market Perform and lowered the $425 price target to $290. The analysts cited Apple’s transparency tracking as Meta’s strongest headwind and that its peak impact will not come until mid-2022. New ad tools for small businesses to work around the Apple headwind have not been as successful as the analysts expected.

Cowen reiterated its Outperform rating on Meta’s stock but lowered the price target from $415 to $330. The analysts cited higher than expected operating expenses and lower guidance for the first quarter, including the impact of Apple’s tracking transparency feature and stiff competition from TikTok.

Credit Suisse reiterated its Outperform rating and lowered the price target from $430 to $336. The analysts think that Meta’s product innovation is underestimated, that growth prospects for Messenger and WhatsApp are not appreciated and that free cash flow growth is coming.

Goldman Sachs maintained its Buy rating on Meta shares but lowered the $445 price target to $355. Meta’s “established role in global digital advertising budgets” is a solid underpinning for buying the stock. Ad performance is expected to improve in the second half of the year, as pre-tracking transparency numbers roll off.

J.P. Morgan Securities downgraded the stock from Overweight to Neutral and reduced the price target from $385 to $284. The firm also removed Meta from its Analyst Focus List. The analysts comment that the big slowdown in ad growth coupled with an expensive multiyear transition to the metaverse will weigh on the share price.

Raymond James downgraded the stock from Strong Buy to Outperform and lowered the price target from $410 to $340. The slower ad revenue guidance, slower e-commerce growth, slower subscriber growth and more competition (especially from TikTok) have led the firm to cut its estimate of 2022 ad growth by a third, from 18% to 12%.

Here is a quick look at other analyst changes. Note that all the new price targets are lower than the current 52-week high.

• Baird: Outperform reiterated, price target cut from $390 to $325
• Bernstein: Outperform reiterated, target cut from $400 to $350
• BofA Securities: Buy reiterated, target cut from $410 to $333
• Jefferies: Buy reiterated, target price cut from $420 to $350
• KeyBanc: Overweight reiterated, target cut from $420 to $280
• MoffetNathanson: Buy reiterated, target cut from $420 to $380
• Morgan Stanley: Overweight reiterated, target cut from $395 to $360
• Oppenheimer: Outperform reiterated, target cut from $405 to $375
• RBC Capital: Outperform reiterated, target cut from $400 to $315
• Stifel: Buy reiterated, target price cut from $400 to $350
• UBS: Buy reiterated, price target cut from $400 to $280
• Wedbush: Neutral reiterated, target cut from $325 to $270