Hot on the heels of disappointing Q3 readings for both Microsoft and Alphabet, Meta (META) will take center stage today when it delivers its latest quarterly statement.
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The worrying trends exhibited in the reports of its fellow tech giants have raised concerns amongst rattled investors, but Meta has already been in that dark spot; its Q2 report was a shambles and the shares are down by 19% since the print. With the headwinds still piling up, though, Deutsche Bank analyst Benjamin Black knows what will assuage nervous investors.
“Heading into the 3Q print,” said the analyst, “we think a better-than-feared result should be able to support the stock in the near term, given investor concerns around an advertising market that continues to deteriorate and META’s recent underperformance compared to the broader market and peers.”
Recent ad checks confirm what is already being reflected in the Street’s revenue estimates — they indicate ad spend on Meta “decelerated” during the quarter. That said, compared to those operating in the brand-awareness category, Black notes that proven platforms such as Meta are typically “more favored by advertisers, which could limit further downside.”
Taking the general macro softness into consideration, Black has lowered his Q3 revenue forecast a touch from $27.8 billion to $27.6 billion, amounting to a 4.9% year-over-year drop (or +1.6% FXN).
On the profitability profile, Black expects an overall OI (operating income) margin of ~22% which will lead to quarterly OI of ~$6.1 billion, about the same as current street expectations.
Looking ahead, Black is hoping for a Q4 revenue forecast that is “modestly higher” than Q3’s growth rate, with the company poised to benefit from several directions. The upcoming holiday season should provide a boost while the company also “starts to lap IDFA-related headwinds,” and stands to gain from the “continued refinement of Reels monetization.”
All told, Black rates Meta shares a Buy, although the price target is lowered from $200 to $170, suggesting shares will appreciate ~31% in the year ahead. (To watch Black’s track record, click here)
What about the rest of the Street? It’s a bit of a mixed bag. Based on 25 Buys, 6 Holds and 2 Sells, the stock claims a Moderate Buy consensus rating. According to the $199.91 average price target, the shares are expected to climb ~54% higher over the coming year. (See Meta stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
