Meta Gets A Higher Price Target From Keybanc Despite Disappointing Q2 Result: Here's Why

Meta Platforms, Inc. META reported late Wednesday below-consensus second-quarter results and issued downbeat revenue guidance for the running quarter. The stock reacted with a 4.65% downward move in after-hours trading.

The Meta Analyst: KeyBanc Capital Markets analyst Justin Patterson reiterated an Overweight rating on Meta shares and upped the price target from $190 to $196.

The Meta Thesis: Meta’s daily average users came in at 1.97 billion, slightly exceeding the 1.96 billion consensus estimate, Patterson noted. Reels showed strong engagement, with revenue surpassing the $1 billion run-rate, the analyst said.

The short-video service saw strong growth in engagement and time spent, the analyst noted. The company expects to monetize Reels at the same rate as Feed in the long term, he added.

Another positive takeaway is the operating expenditure discipline implied by the guidance, Patterson said. The company lowered its 2022 opex guidance from $87 billion-$92 billion to $85 billion-$88 billion, the analyst noted.

“We believe the opex guidance reduction demonstrates that Meta is willing to adjust spend to preserve profitability, and may also signal more modest investment in 2023E-2024E,” Patterson said.

Related Link: Facebook Parent's Metaverse Unit Loses $2.8B In Q2, But Zuckerberg Sure Of Unlocking 'Billions, Trillions' In Value With Time

The company’s revenue guidance of $26 billion-$28.5 billion implies a sequential drop, and the analyst expects consensus estimates to be reset meaningfully after the quarter.

Citing worse-than-anticipated advertising pullback and continued forex headwinds, KeyBanc reduced its revenue estimates for 2022 and 2023 by 1% and 2%, respectively. The firm, however, raised its earnings per share estimates for the years by 2.4% and 0.4%, respectively. Giving effect to the revised EPS estimates, the firm raised its price target for Meta stock modestly.

Meta Price Action: Meta shares fell 4.65% in after-hours trading on Wednesday before ending at $161.70. according to Benzinga Pro Data.