'Air Pocket' In Advertising Threatens Snap, Netflix, Amazon And Google: Analyst Says Wait 'Until The Fog' Clears

by Adam Eckert Benzinga Staff Writer

Zinger Key Points

Jefferies expects advertising names to face continued selling pressure in the near term as a hard landing looms over stocks.
"The first thing you do in a hard landing as a corporation is you cut your ad spend," analyst Brent Thill says.

Stocks face a hard landing as a result of the Federal Reserve's response to inflation. One analyst believes advertising names are going to hit the ground first.

What To Know: Jefferies analyst Brent Thill downgraded Snap Inc SNAP, warning of deteriorating ad space. He explained why Snap isn't the only name at risk Thursday on CNBC's "TechCheck."

"Our house view at Jefferies is that we are going into a hard landing versus a soft landing. The first thing you do in a hard landing as a corporation is you cut your ad spend," Thill said.

Ad spend is the first thing to go because it can be easily adjusted, he said, likening it to a stereo knob. Corporations are already tightening ad budgets and it's only going to get worse as the country heads into the first quarter of 2023, he said, citing weak retail sales numbers.

"So we think we've got an air pocket and there's no visibility. With no visibility, you sit on the sidelines until the fog bank clears," Thill said.

That's what Thill is telling his clients to do, believing ad-exposed names should be set aside until nearing the second half of 2023.

Some of the other stocks that could continue to face selling pressure include Netflix Inc NFLX, Amazon.com, Inc. AMZN and Alphabet Inc GOOGGOOGL.

He told CNBC it's possible that some ad budgets could be shifted away from experimental platforms toward "proven" platforms, which would benefit Amazon and Google, but it's best to wait it out.

"Until we get better visibility, I think the whole ad industry is in somewhat of a tailspin," Thill said.

Price Action: At market close Thursday, Snap was down 8.18% at $8.76, Amazon was down 3.42% at $88.45, Alphabet (GOOG) was down 4.31% at $91.20 and Netflix was down 8.63% at $290.41.

Photo: Photo Mix from Flickr.