Credit Suisse Continues To See Sharp Upside In Meta, Alphabet Despite Double-Digit Price Target Cuts

Credit Suisse analyst Stephen Ju re-rated two significant FAANG stocks, slashing their price targets.
Ju maintained Meta Platforms Inc META with an Outperform rating and cut the price target from $273 to $245.
The re-rating factored in the potential for better-than-expected ad revenue growth on product innovation, conservative Street models underestimating the long-term monetization potential, and optionality for faster FCF growth.
His checks indicate an in-line Q2, with growth expectations for the second half of 2022 moving lower on the macro backdrop, with flattish quarter-over-quarter budget growth from Q2 to Q3.
Ju has taken a more conservative second half of 2022 and forecasts ad revenue growth of 1% on a reported basis for Q3 and -3% for Q4. The analyst has also decreased his ad revenue growth estimate for 2023 to 11% FXN.
Ju maintained Alphabet Inc GOOG GOOGL with an Outperform and slashed the price target from $170 to $143.
The re-rating factored in ongoing monetization improvements in Search through product, AI-driven updates, greater-than-expected revenue contribution from non-Search businesses, optionality, shareholder value creation from the new monetization initiatives tab, and the commercialization of Other Bets.
In what the analyst believes will be the first of many adjustments to his estimates, given deteriorating visibility, Ju decreased his forecasts for Google's advertising businesses as he received marketer feedback of declining budgets owing to macro uncertainty.
While the extent of ad revenue compression for Q3 and beyond remains unknown, marketers clearly show signs of defensive behavior amid a downturn as they rotate budgets into Google in pursuit of higher ROI, the analyst asserts.
Price Action: META shares traded higher by 4.65% at $175.09 on the last check Tuesday. GOOG shares traded higher by 3.02% at $113.23.
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