Key points:
- Meta Platforms, owner of Facebook, released disappointing earnings this morning
- Major headwinds include a long-winded Metaverse transition and a cutback in ad revenue
- Numerous firms have slashed price targets on Meta due to growing concerns
Apple’s data changes have really hit home for companies like Meta; which owns Facebook, a platform that derives high levels of revenue through personalized advertising. Apples’ IDFA changes have also spurred a huge sell-off in Snap stock, whose revenue model is equally affected by restrictions in advertising.
Meta (NASDAQ: FB) stock dropped more than 20% in Thursday’s premarket trading, after posting disappointing earnings that missed the general consensus. Henceforth, we’ve seen price target cuts across the board this morning, as analysts grow concerned for the future of the company’s growth.
At JPMorgan, analyst Doug Anmuth downgraded Meta to Neutral from Overweight, cutting his price target from $385 to $284 and removing the company from the firm’s Analyst Focus List. Anmuth’s main concerns lie in the company’s ‘expensive, uncertain, multi-year transition’ to the Metaverse – which seems to be a growing focus in the tech-driven sector.
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Again, Apple’s changes have provoked a serious slowdown in advertising growth, and coupled with the company’s Metaverse endeavor, the future landscape looks a little rocky for Meta.
However, analyst from Credit Suisse Stephen Ju – although still lowering Meta’s price target to $336 from $430 – looks forward to potential product monetization which could see an upswing in ad revenue; in particular, the markets neglect of the future potential in Messenger and WhatsApp. Ju also correctly pointed to the company’s ‘optionality for faster-than-expected free cash flow’ as the company finds greater efficiency in ‘content screening and security’
Advertising headwinds are likely to prove problematic for a range of digital companies. We’ve seen what has happened to Snap, and with today’s 24% sell-off in Meta; it’s clear that the digital landscape is changing, and companies need to find other monetization strategies to stay on top of the ball.